FACTORS AFFECTING BUSINESS SUCCESS OF SMALL & MEDIUM ENTERPRISES (SMES)

Your task is to write a 4-page critique of the journal article by Dr M.Philip.
(See uploaded Reading-article by Dr. M.Philip)

This critique essay is divided into two parts.
1. You need to have a summary of the article at first (about 200words)
The summary section should include the main points of the original text rewritten in your own words. You should acknowledge the source of the original text as well as the author.
The original text must be summarized using your own words, the main points must be identified and you must make reference to the author of the original text and other source details.
2. Then you will write the critique section (about 800words)
The critique section should analyse the effectiveness of the author’s arguments, position, assumptions, style, credentials or successfulness in arguing her/his point.
You must not lift any text from the original without paraphrasing and/or citing the author.

You can only cite the given article by Dr. Philip in MLA style. No outside sources allowed.

You will be assessed on:
• Acknowledgement of the author and the source of the text that is being summarised
• Identification of the main points contained in the original text
• Use of paraphrasing techniques
• Word count
• Logical development of paragraphs
• Structure of the presentation
• Your ability to assess the strengths and weaknesses of the author’s arguments
• An understanding of how the piece of writing relates to broader issues
• An evaluation of the style of writing
Also, read the uploaded Others-Rubric and get stick to it.

Task Response
25 marks Structure & organisation
25 marks Reference to original source
25 marks Language & coherence
25 marks
70 +  The main idea is expressed clearly and logically in well-structured paragraphs
Arguments are balanced and compelling
 There is a sound, rational conclusion consistent with the arguments put forward  Demonstrates clear understanding of information in the text and details of information in the text are presented in a very logical order
 Sentences and paragraphs are complete, well-constructed and of varied structure
 Excellent layout, incorporating a single font with suitable spacing
The word count is strictly adhered to  The author and source of text that is being summarised is acknowledged in the opening paragraph accurately
 Excellent use of reporting language and phrases throughout the summary and review
 Arguments and attitudes that are contained in the original text are represented and challenged fairly and accurately  There is a wide range of appropriate academic vocabulary and phrases
 The writer consistently produces sentences of grammatical accuracy and clarity
 Paragraphs are developed logically and cohesively
60 +  The main idea is mostly expressed clearly with some minor confusion or misinterpretation
Arguments mainly balanced and plausible
 There is a good conclusion that is generally consistent with the arguments put forward  Demonstrates a good understanding of information in the text and details of the summary are presented in a logical order
 Majority of sentences are complete and well-constructed
 Clear layout, incorporating a single font with suitable spacing
The word count is within acceptable margins  The author and source of text that is being summarised is acknowledged in the opening paragraph with only minor inaccuracies
 Good use of reporting language and phrases in summary and review
 Arguments and attitudes that are contained in the original text are mostly represented and challenged fairly and accurately  There is a good range of appropriate vocabulary and phrases
 The writer mostly produces sentences of grammatical accuracy and clarity
 Paragraphs are mostly developed logically and cohesively
50 +  Main idea is unclear-not specifically stated in the writing.
Arguments are acceptable, although they lack depth and sophistication
 The conclusion is adequate and relates in part to the arguments put forward  Demonstrates an adequate understanding of information in the text and details of the summary are generally presented logically but sometimes in a random order
 Sentence and paragraph structures are mostly complete but there are some noticeable errors
 Although there may be occasional inconsistencies in spacing or fonts, nothing seriously detracts from the presentation of the summary
The word count falls short or exceeds expectations but it acceptable  The author and source of text that is being summarised is acknowledged in the opening paragraph with some inaccuracies
 Adequate use of reporting language and phrases in summary
 There is some effort to represent arguments and attitudes that are contained in the original text fairly and accurately  There is an adequate range of appropriate vocabulary and phrases
 The writer produces sentences with some grammatical errors, but they rarely impede communication
 Some paragraphs or elements are developed logically and coherently
D/F  The main idea is not present.
Arguments are undeveloped or unclear
The conclusion does not relate to the arguments put forward  Demonstrates little or no understanding. Ideas are not in a logical order
 Many sentence fragments or run-on sentences
 Presentational issues are significant enough to make the writing difficult to read and impede understanding
 The word count is unacceptably excessive or insufficient  There is no reference to the author or
source of text that is being summarised
 Reporting language and phrases are not used in the summary and review
 Arguments and attitudes contained in the original text are not represented fairly or accurately  There is an inadequate range of appropriate vocabulary and phrases
 The writer produces sentences with frequent grammar errors that cause difficulty to the reader
 Paragraphs are not developed logically or coherently
Mark
Comments

APJRBM Volume 1, Issue 2 (November, 2010) ISSN 2229-4104
Sri Krishna International Research & Educational Consortium
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FACTORS AFFECTING BUSINESS SUCCESS OF
SMALL & MEDIUM ENTERPRISES (SMES)
Dr. Mathew Philip
Associate Professor, Department of Business & Accounting
Muscat College, Sultanate of Oman
(Affiliated to the University of Stirling, UK)
Abstract
The objective of this study was to identify determinants of small and medium enterprises (SMEs)
business success in an underdeveloped country like Bangladesh. The intention of this study is to
provide the understanding of how people should start their business by looking at all the factors
affecting business success hence help to reduce the risk of failure and increase chances of
success in starting a business for SMEs. Findings of this study are useful for entrepreneurs and
policy makers of the country. The study examined six factors that influence the SMEs business
success. These factors are: characteristic of SMEs, management and know-how, products and
services, the way of doing business and cooperation, resources and finance, and external
environment. The theoretical framework has been drawn out and questionnaire was designed
based on the factors chosen. The data collected were analyzed by using SPSS program which
provides relevant analysis such as reliability analysis, frequency analysis, regression analysis,
one-way ANOVA and T-test. Six hypotheses were developed to study the determinants of
Business Success of SMEs in Bangladesh. The entire hypotheses were successfully tested with
SPSS and four hypotheses were accepted. The regression analysis result shown that the most
significant factors affecting business success of SMEs in Bangladesh were products and services,
the way of doing business, management know-how and, external environment.
Key Words: Business Success, SMEs, Bangladesh
Introduction
Research into small and medium sized enterprises (SMEs) has grown strikingly during the last
decade. This intense attention in the backdrop of the failure of various structural and trade policy
reforms to stimulate any significant response from the private sector is remarkable, and seems to
suggest that liberalisation measures must be supplemented by pro-active policies to attain the
desired goal (Bhattacharya, 2002). A huge majority of firms worldwide are SMEs, and they play
a significant role in the economy. There is a broad consensus that a vibrant SME sector is one of
the principal driving forces in the development of a market economy. SMEs stimulate private
ownership and entrepreneurial skills, are flexible and can adapt quickly to changing market
demand and supply situations, generate employment, help diversify economic activity, and makeAPJRBM Volume 1, Issue 2 (November, 2010) ISSN 2229-4104
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a significant contribution to exports and trade. Even in the developed market economies SMEs
account for a large share in output and employment (UNECE, 2003). Bangladesh has thus far
failed to maximize the benefits derived from the SME sector, which promises and needs to play a
pivotal role in promoting and sustaining the industrial as well as overall economic growth
(Ahmed M. U., 2003). The failure can be attributed to various reforms and trade liberalisation
measures that have squeezed the sphere of Government’s activity in business. Consequently, the
private sector has to lead the economy in a dynamic growth path. Most of the previous studies
dealing with the conditions of successful business have focused on large companies rather than
SMEs (i.e., Ghosh and Kwan, 1996 ; Kauranen, 1996 and Pelham, 2000). However, changes in
the environment cause more uncertainty in SMEs than in large companies. Their resources for
acquiring information about the market and changing the course of the enterprise are more
limited. The response to environmental changes is different in SMEs than in large companies.
Large firms may even exit from one of its business areas, but this is not usually possible in a
single-business firm. The options for responding are limited by the firms’ resources and strategic
choices as well as by the opportunities offered by the industry and location. Those ways may
also differ between the development stages of the firm. SMEs have long been believed to be
important in supporting economics development within a country (Mazzarol, Volery, Doss, &
Thein, 1999). One of the important roles of SMEs in this context includes poverty alleviation
through job creation. Thai SMEs are increasingly seen as creator of new jobs (Swierczek & Ha,
2003) and Vietnamese SMEs employ 64% of industrial workforce.
Literature Review
The word enterprise has been used in a range of contexts and meanings (Bridge, O’Neill &
Cromie 2003). Salminen (2000) describes an enterprise as a controlled system consisting of a
detector, a selector and an effector. The detector is the function by which a system acquires
information about its environment, which is then used as the basis of the selection of a
behavioral response by the selector. Finally, the behavior is executed by the effector. The
measurement system of an enterprise gathers information about the changes in both the
environment and the performance of the enterprise. This information is then used together with
the values and the preferences of the enterprise and its management to produce decisions about
the required actions. As a result, the outputs of the enterprise – the products, the services, the
operational performance and the financial performance – are changed.
Firm performance refers to the firm’s success in the market, which may have different outcomes.
Firm performance is a focal phenomenon in business studies. However, it is also a complex and
multidimensional phenomenon. Performance can be characterized as the firm’s ability to create
acceptable outcomes and actions.
Success, in general, relates to the achievement of goals and objectives in whatever sector of
human life. In business life, success is a key term in the field of management, although it is not
always explicitly stated. Success and failure can be interpreted as measures of good or indifferent
management. In business studies, the concept of success is often used to refer to a firm’s
financial performance. However, there is no universally accepted definition of success, and
business success has been interpreted in many ways (Foley & Green 1989). There are at leastAPJRBM Volume 1, Issue 2 (November, 2010) ISSN 2229-4104
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two important dimensions of success: 1) financial vs. other success; and 2) short- vs. long-term
success. Hence, success can have different forms, e.g. survival, profit; return on investment, sales
growth, number of employed, happiness, reputation, and so on. In other words, success can be
seen to have different meanings by different people. In spite of these differences, people
generally seem to have a similar idea of the phenomenon, i.e. of what kind of business is
successful.APJRBM Volume 1, Issue 2 (November, 2010) ISSN 2229-4104
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Contribution of SMEs in the National Economy of Bangladesh
Any precise quantitative estimate of the importance of SMEs in Bangladesh economy is
precluded by non-availability of comprehensive statistical information about these industries at
the national level. BSCIC estimates suggest that there are currently 55,916 small industries and
511,612 cottage industries excluding handlooms. Including handlooms, the number of cottage
units shoots up to 600,000 units indicating numerical abundance of small and cottage industries
(SCIs) in Bangladesh. The most recent private sector survey estimates the contribution of the
micro, small, and medium enterprises (MSMEs) is 20-25% of GDP. Quoting informal Planning
Commission estimates, the SEDF puts the number of medium enterprises (undefined) to be
around 20,000 and that of SCIs to be between 100,000 to 150,000. This wide variation in the
BSCIC and Planning Commission estimates of the number of SMEs might be due to at least two
reasons: (a) different definitions of SMEs and (b) different coverage of SME families. There is
an urgent need for adopting and using a uniform set of definitions for SMEs by all government
agencies to help formulation of pro-active SME promotion policies. Regardless of the correct
magnitude, SMEs undoubtedly play a very important role in the economy of Bangladesh in terms
of output, employment, and private sector activities (Ahmed, 2003). They are quite predominant
in the industrial structure of Bangladesh comprising over 90% of all industrial units. Together,
the various categories of SMEs are reported to contribute between 80-85% of industrial
employment and 23% of total civilian employment (SEDF, 2003). However, serious
controversies surround their relative contribution to Bangladesh’s industrial output due to
paucity of reliable information and different methods used to estimate the magnitude. The most
commonly quoted figure by different sources (ADB, World Bank, Planning Commission and
BIDS) relating to value added contributions of the SMEs is seen to vary between 45-50% of the
total manufacturing value added.
A significant proportion of SME activities may be in the informal sector, for which there is no
dependable information. Besides, the survey estimates SME contribution based on an approach
that requires the use of data on profits earned by enterprises. However, it is very difficult to
gather and measure profits of establishments. Therefore, the aforementioned contribution of
SMEs may be underestimated. Further discussions on the role of SMEs in Bangladesh’s
economy can be found in (Ahmed, M.U., (2003). The robustness of SME contributions to
employment generation is a common phenomenon in most developing countries in that the
magnitude varies between 70% to 95% in Africa and 40% to 70% in the countries of the AsiaPacific region (Ahmed, M.U., 1999). While SMEs are characteristically highly diverse and
heterogeneous, their traditional dominance is in a few industrial sub-sectors such as food, textiles
and light engineering and wood, cane and bamboo products. According to SEDF sources quoted
from ADB (2003), food and textile units including garments account for over 60% of the
registered SMEs. Various recent studies (Ahmed, M.U. 2001, ADB 2001, USAID 2001) show
that SMEs have undergone significant structural changes in terms of product composition,
degree of capitalization and market penetration in order to adjust to changes in technology,
market demand and market access brought by globalization and market liberalization.
Growth of SMEs in BangladeshAPJRBM Volume 1, Issue 2 (November, 2010) ISSN 2229-4104
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In terms of number of establishment, the SME sub-sector has exhibited notable dynamism. Table
1 presents the trend of SME sector growth. Available evidence (Ahmed M.U. et. al., 1992)
suggests that 60% of new industrial enterprises during 1980s were SMEs.
Table 1:
Growth of SSIs sector (Excluding Handlooms) in Bangladesh
Year No. of Units Employment Value Added (Tk.)
Small and Cottage
Combined
Small Cottage Small Cottage
1981 24,590 321,743 322,110 855,200 17,987
1991 38,294 405,476 523,472 1,331.032 21,154
2001 55,916 511,621 808,959 1,166,724 29,323
Average Annual
Growth Rate
6.4% 3.0% 7.6% 4.7% 3.2%
Source: Ahmad, M. U., 2001.
Growth in SME employment seems to have been even better during the same period. The dismal
performance in value added growth is explained by the weak and faulty database used by the
Bangladesh Bureau of Statistics (BBS) to estimate the parameters (Bakht 2001). Indeed, when
revised estimates of value addition in the SMEs are made using the new system of national
accounts8, the annual compound rate of growth of value added by the SME sector not only shots
up to 7.7% per annum during 1989/90 and 1994/95, it exceeds that of the large-scale industries
during most of the 1990s.
Broadly four industry categories (food and allied products, textiles and apparels, and engineering
and fabricated metal products) currently dominate the SME sector in Bangladesh. In recent
years, other industries which have grown in importance in the SME sector are light engineering,
readymade garments, printing and publishing, wood and wood products, plastic products,
electrical goods, electronics, artificial jewelers, wooden and steel furniture, television and radio
assembling and soaps and detergents. The growth in new sectors is reflective of a structural
change taking place in the SME sector from traditional to relatively modern product categories,
perhaps with higher capitalization and use of better production techniques. Summarizing the
findings of various major studies the SEDF lists the following important positive changes taking
place in the situation of the SMEs in Bangladesh: SMEs have diversified their activities, entry
and exit into the sector has become easier, the RMG industry has contributed significantly to
SME development by providing them with orders for accessories and packaging materials, the
development of the footwear industry has increased subcontracts to SMEs, small-scale
entrepreneurship has grown significantly in agro-processing in general and in poultry in
particular.
Factors Affecting Business Success in SMEsAPJRBM Volume 1, Issue 2 (November, 2010) ISSN 2229-4104
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There is considerable variation in the criteria for success used in previous studies. Empirical
studies of factors affecting SME success can be roughly divided into two groups according to
whether they focus on a quite limited set of variables or try to capture more holistic profiles of
successful SMEs. Previous empirical research has used both surveys and case studies. There are
also some compilations of the results of previous studies of the factors contributing to firm
success. For instance, Storey (2000) has compiled the results of previous studies focused on the
birth, growth and death of small firms, on the basis of which he presents some normative “dos
and don’ts” lessons for small firms.
The following recent studies based on surveys have dealt with the factors affecting SME success.
Nurul Indarti and Marja Langenberg (2005) identified key components to be important in
analyzing the business success of SMEs which includes the characteristics of the entrepreneurs;
the characteristics of the SMEs; and the contextual elements of SME development. Westhead
(1995) studied factors influencing the survival of 227 high-technology small firms. Ghosh and
Kwan (1996) made a cross national intersectoral study of the key success factors of 152 SMEs in
Singapore and 164 SMEs in Australia. Kauranen (1996) carried out a follow-up study of 37 new
manufacturing firms in Finland and studied the determinants of the future success of the firm in
the short term and in the long term. Yusuf (1995) explored critical success factors for small firms
in several industry sectors based on the perceptions of 220 South Pacific entrepreneurs.
Wijewardena and Cooray (1996) explored the importance of a set of success factors by studying
a sample of 300 small manufacturing firms in Japan. Gadenne (1998) investigated the effect of
various management practices on small firm performance by studying 369 small businesses in
the retail, service, and manufacturing industry in Australia. Bracker and Pearson (1986) studied
planning and financial performance of small mature firms in the dry cleaning business. Baker et
al. (1993) studied planning in successful high-growth small firms. Pelham (2000) explored the
relationship between market orientation and the performance of manufacturing SMEs in eight
industry sectors.
Based on the findings of earlier research, the factors affecting SME business success were
classified into the following categories: (1) an entrepreneur Characteristics (Kristiansen,
Furuholt, & Wahid, 2003; and Rutherford & Oswald, 2000), (2) characteristic of SME
(Kristiansen, Furuholt, & Wahid; 2003), (3) management and know-how (Swierczek & Ha,
2003), (4) products and services (Wiklund 1998; and Hitt & Ireland 2000). (5) customers and
markets (William, James, & Susan; 2005), (6) the way of doing business and cooperation (Hitt &
Ireland 2000; and Jarillo 1988). (7) resources and finance (Swierczek & Ha, 2003; and
Kristiansen, Furuholt & Wahid, 2003). (8) strategy (McMahon, 2001), (9) external environment
(Huggins, 2000; and Nurul Indarti & Marja Langenberg, 2005); and (10) internet (Henriette
Hesselmann, Comcare, and Peter Bangs; 2002). However only 6 factors namely Characteristics
of SMEs, Management and know-how, Products and Services, The Way of Doing Business and
Cooperation, Resources and Finance and External Environment were considered for the
theoretical framework of this study based on suitability with Bangladeshi context. Therefore,
Business success is the dependent variable and independent variables are: characteristic ofAPJRBM Volume 1, Issue 2 (November, 2010) ISSN 2229-4104
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entrepreneur and SMEs, management and know-how, products and services, the way of doing
business and cooperation, resources and finance, and external environment.
Research Hypotheses
The study intended to see the relationship between entrepreneur characteristics, characteristic of
SMEs, management and know-how, products and services, the way of doing business and
cooperation, resources and finance, strategy, and external environment towards business success.
From the above theoretical framework, the following hypotheses were derived:
H1 There is a relationship between SMEs characteristics and business success in SMEs.
H2 There is a relationship between management & know-how and business success in SMEs.
H3 There is a relationship between products & services and business success in SMEs.
H4 There is a relationship between the way of doing business & Cooperation and business
success in SMEs.
H5 There is a relationship between resources & finance and business success in SMEs.
H6 There is a relationship between external environment and business success in SMEs.
Research Approach
A sample of 300 employees from SMEs located in the Dhaka, Narayangonj, Khulna and
Chittagong were chosen for the purpose of this study. This geographical area has been chosen as
they represent a large number of SMEs in Bangladesh. The population frame was drawn from
the list obtained from the Bangladesh Small and Cottage Industries Corporation (BSCIC). Data
collection was accomplished by mail and personal delivery. The sampled companies were
contacted in advance by telephone. The population of the study consisted of front-line employees
and middle management levels of SMEs in those areas mentioned earlier. A self-designed
questionnaire was used to gather the research data. The questionnaire consisted of three parts.
The first part comprised of demographic, characteristic, and profile information of the
respondents. The respondents were asked to rank statements on contextual condition related to
each success factor faced by the respondents in the second part. This part consisted of 45
questions which were intended to measure factors of business success, using 5-point likert scale
anchored by strongly agree to strongly disagree. The factors were characteristic of SMEs,
management and know-how, products and services, the way of doing business and cooperation,
resources and finance, strategy, management know how; and external environment. In the third
part, the respondents were asked to score the importance of perceived of business success. Fivepoint likert scale anchored by strongly agree and strongly disagree were applied to measure the
perceived success. A total 300 sets of questionnaires were distributed among managers of SMEs,
only 92 participants were responded.
Survey Results
A total 300 sets of questionnaires were distributed to selected respondents, only 92
questionnaires were collected back; the response rate is 30.46% (i.e. 92/302). However only 89
questionnaires were used for analysis, three questionnaires was rejected due to the respondents
were not from the management level.APJRBM Volume 1, Issue 2 (November, 2010) ISSN 2229-4104
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Descriptive analysis shows that out of 89 respondents, there were more male than female
respondents. The results show that 82% of the respondents are male and the remaining 18% are
female. The majority of respondents, a total of 44 (49.4%) were aged between 31 to 40 years old,
23.6% each (21 each) were aged between 21 to 30 and 41 to 50 years old, 3.4% (3) were above
50 years old, and 0% of respondents were from age less than 20 years old. There are zero
respondent from Primary School, 5 (5.6%) were from Secondary School, 20 (22.5%) were from
Certificate/Diploma, 40 (44.9%) were from Bachelor’s Degree, 24 (27%) were from Master’s
Degree, and no respondent from PhD/DBA. Two respondents having working experience less
than 2 years (2.2%), 10 (11.2%) respondents between 2 to 5 years, 29 (32.6%) respondents were
between 6 to 10 years, 33 (37.1%) respondents were between 10 to 20 years, and 15 (16.9%)
respondents were more than 20 years. On the other hand for the Duration of Organization
Operated, 18 (20.2%) were less than 5 years, 21 (23.6%) were between 5 to 10 years, 17 (19.1%)
were between 10 to 15 years, 7 (7.9%) were between 15 to 20 years, and 26 (29.2%) were more
than 20 years.
Reliability analysis was used to measure both consistency and internal stability of data. The
Cronbach’s Alpha measuring the inter-item consistency and reliability measure the coefficient
that reflects how well items in a set are positively correlated to one another. Cronbach’s Alpha
that are less than 0.6 are generally considered to be poor, those in the 0.7 range to be acceptable,
and those over 0.8 to be good; the closer the reliability coefficient gets to 1.0, the better.
Cronbach’s Alpha for six independent variables and the dependent variable were above .70.
Therefore data that were collected for this research were considered to be internally stable and
consistent.
4.1 Factors Affecting Business Success of SMEs
Multiple Regression Analysis was used to determine whether the six independent variables,
which are SMEs characteristic, management and know-how, products and services, the way of
doing business and cooperation, resources and finance, management know how; and external
environment, have any significant effect toward Business Success of SMEs in Bangladesh. The
results are shown in Table 2.
The findings of the study revealed that products and Services, management know-how, the way
of doing Business & Cooperation, and External Environment have significant positive effect on
the Business Success of SMEs in Bangladesh. Characteristics of SMEs, and, resources and
finance were found to have no significant effect on the Business Success of SMEs in
Bangladesh.
Factors Beta T-Ratio Sig. t
SMEs Characteristic 0.046 0.312 0.756
Management and Know-How 0.218 1.561 0.048
Products and Services 0.265 1.955 0.033
The Way of doing Business & Cooperation 0.227 1.630 0.039
Resources and Finance 0.051 0.559 0.578APJRBM Volume 1, Issue 2 (November, 2010) ISSN 2229-4104
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External Environment 0.288 2.265 0.019
R square = 0.523
Durbin-Watson = 1.545
F = 15.561
Sig. F = 0.000
Condition Index = 41.042
Table 2: Results of Regression Analysis on the Business Success of SMEs
The overall results of the regression analysis shows that this model is well constructed and it is
well represented as reflected in the variables selected. Table 2, the summary table on regression
analysis indicated that the R-square is 52.3 percent. This means that the seven variables which
include SMEs characteristic, management and know-how, products and services, the way of
doing business and cooperation, resources and finance, and external environment can explain
52.3 percent variations in the business success of SMEs in Bangladesh.
The Durbin-Watson statistic shows that the serial correlation of residuals is 1.545, the value falls
within the acceptance range (1.5 to 2.5). This means that there is no auto correlation problem in
the data. The Condition Index, Variance Inflation Factors (VIF) and tolerance all fall within the
acceptance range (Condition index = 30.083, VIF = 1 – 10, tolerance = 0.1 – 1.0). This means
that there is no multi-collinearity problem in the regression model used for this study. The
histogram indicates that data used in this study is normally distributed and F-value is found to be
significant at 1% significance level (sig. F = .000). This concludes that the regression model used
in this study is adequate or in other words, the model was fit.
Effect of Demographic Factors toward Business Success of SMEs
One-Way ANOVA was used to find out whether age, education level, working experience and
duration of organization operated have any significant effect on business success in SMEs. This
technique examined the variability of the observation within each group as well as the
availability between the group means. Therefore, it was conducted to find out whether the
various groups are different in respect of business success. The results of the analysis show that
only one of the demographic factors which is duration of organization operated has significant
effect toward business success of SMEs. Duncan statistics shows that SMEs that are operated
longer period have been more successful in compare to those have been in operation in a shorter
period. In addition to this independent sample t-test was used find out whether gender plays any
significant role in business success and found out that gender does play any role in Business
Success of SMEs in Bangladesh.
Discussion
The purpose of this study was to identify the factors affecting the business success in small and
medium sized enterprises in Bangladesh. A major implication for the findings is that these
findings will able to give better understanding for entrepreneurs and business owners in
addressing the factors which will significantly affect the business success in SME. The study of
the factors affecting business success of SMEs is critical in understanding the business continuityAPJRBM Volume 1, Issue 2 (November, 2010) ISSN 2229-4104
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and growth hence help supporting economics development within a country. The results of this
study can also be used as reference for anyone who is interested to start their own business which
will provide insights into decision making in staring a business and also for any companies
which are interested to continue to sustain and grow.
To achieve business success, many factors should be optimal simultaneously, since SMEs
success is a multidimensional phenomenon. Both firm-internal and firm-external factors affect
firm success. Entrepreneurs in successful SMEs and those in failed SMEs thought that pretty
much the same factors are the most important for business success, and held the same views on
the factors to be avoided in business. The research has looked into characteristic of SMEs,
management and know-how, products and services, the way of doing business and cooperation,
resources and finance, and external environment.
The results show that product and services played an important role in ensuring the SMEs
business success in Bangladesh. Innovative product, quality, cost, reliability, and services are the
key strategic dimension in business success. Innovative product gives added value to the
customer and it is important to achieve a suitable balance between product quality and costs.
Small-business owners must have a missionary zeal about their products or services, be willing
to be personally involved in it, be willing to stick with the business, be able to define the market
clearly and pay attention to details and proactiveness. Beside that, companies must compete
based on their strength and specialization which is classified as cost leadership, differentiation,
and focused Michael Porter (1985). Cost leadership-based companies have tight controls on their
operational costs, have efficient production, are volume producers or focused on tonnage.
Differentiation described companies which offer differences in their product or services. They
tend to put brands as a market capture, have high service levels, unique distribution and nonstandard terms of business. Lastly, focused companies are companies concentrating on a
particular buyer, group, geographic area or segment of the product line, continual improvement
in quality, cost, delivery lead time, customer service and flexibility are part of the package to
become world class. Innovators with continuous growth should pay special attention to their
research and development, and the ability to maintain their innovativeness.
External environment factor play a very important role as well for firm success. Social network,
government support, and legality, are the key strategic dimension in external environment in
business success. Networks represent a means for entrepreneurs to reduce risks and transaction
costs and also to improve access to business ideas, knowledge and capital. A social network
consists of a series of formal and informal ties between the central actor and other actors in a
circle of acquaintances and represents channels through which entrepreneurs get access to the
necessary resources for business start-up, growth and success (Kristiansen, 2003). In developing
areas, satisfactory government support has been shown to be important for small firm success
(Yusuf 1995). In many cases, dealing with legal aspects has forced the SMEs to allocate
significant amount of financial resources due to bribery practices. Legal aspect is often also used
in selection operating decision in order to ensure future business success (Mazzarol & Choo,
2003).
Business success is usually the outcome of the way of doing business and cooperation. Interfirm
cooperation, consultation, performance measurement, and flexibility may play an important roleAPJRBM Volume 1, Issue 2 (November, 2010) ISSN 2229-4104
Sri Krishna International Research & Educational Consortium
http://www.skirec.com
in business success. Inter-firm cooperation contributes positively to gaining organizational
legitimacy and to developing a desirable marketplace reputation. Cooperation also may enable
the small firm to improve its strategic position, focus on its core business, enter international
markets, reduce transaction costs, learn new skills, and cope positively with rapid technological
changes. Successful firms were likely to spend more time communicating with partners,
customers, suppliers, employees. Use of outside professionals and advisors, and the advice and
information provided by customers and suppliers is also important for business success.
Networking seems to be important both between and within firms. The proportion of SMEs led
by an entrepreneurial team was high among successful SMEs and low among failed SMEs, so
fostering the formation of entrepreneurial teams in starting up businesses is recommended
A huge proportion of successful SMEs are led by men. However, there seems to be no
association between the gender of an entrepreneur and SME success. Also, SMEs led by
woman are rarely growth seeking. From this point of view, it could be expected that women
have underutilized growth potential. On one hand, women should be encouraged to become
entrepreneurs, and on the other hand female entrepreneurs should be encouraged to expand their
firms. However duration of organization operated has a significant effect on the business success
in SMEs; the longer the organization operates the more successful they are.
Conclusion
We attempted to find out the most significant factors that affect the Business Success of SMEs in
Bangladesh and found out that product and services, external environment, and management
know-how are the most significant determinants of Business Success of SMEs in Bangladesh.
Products and Services hypothesis accepted as innovative and high quality of product gives added
value to SMEs customer in Bangladesh. Most of the Penang SMEs adopted Porter’s Generic
Strategies by Michael Porter; they are cost leadership, differentiation, and focused. To ensure
Bangladeshi SMEs can continue successful they need to ensure good products and services
deliver to customer continuously. External Environment hypothesis accepted as social network
help entrepreneurs in Bangladesh to reduce risks and transaction costs, improve access to
business ideas, knowledge and capital. Government support is vital to foster SMEs development
and legal aspect is used in selection operating decision in order to ensure SMEs future business
success. Hence, Bangladeshi SMEs should ensure they have built a strong social network and
good government relationship in order to ensure their business success. The Way of doing
Business & Cooperation hypothesis accepted as inter-firm cooperation contribute positively to
gaining organizational legitimacy and to developing a desirable marketplace reputation, and
enable the small firm to improve its strategic position, focus on its core business, enter
international markets, reduce transaction costs, learn new skills, and cope positively with rapid
technological changes. Besides that, use of outside professionals and advisors should continue to
be practiced by Bangladeshi SMEs.
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