EFFECT OF PARTNERSHIP AND JOINT VENTURE BUSINESS IN SMALL SCALE BUSINESS IN NIGERIA, PROBLEM AND PROSPECT
- BACKGROUND TO THE STUDY
Small and Medium Enterprises (SMEs), new or existing, often face certain challenges when they approach products providers for both enterprise fixed capital investment and market standards. The insufficient supply of microloans is a major issue, particularly where business creators are unemployed persons, women or form part of ethnic minorities with different cultural dependencies. Supporting the supply of microloans is therefore not only an issue of entrepreneurship and economic growth, but also of social inclusion.
Nigeria has been in the constant wheel of fighting for liberalization of market in the African’s sister countries. This gave to the country the political power but remaining behind economic development (NSGRP, 2008). Further, it was reported that there are more than 1.7 million SME projects in Nigeria that employed more than 3 million people, which represent 20% of labor force in Nigeria, where SMEs are vital engines for the economy growth and play a great role for gross domestic product of Nigeria (NSGRP, 2008).
Deakins (2009) agreed that there are quiet numbers of potential reasons why firms and organizations merge together to form a partnership or joint venture businesses.
A joint venture is a procedure used to respond to specific business phenomena such as access to new markets, specific government policy, business capacity, technology transfer or economies of scale. An international joint venture is a separate legal organisational entity representing the partial holdings of two or more parent firms, in which the headquarters of at least one is located outside the country of operation of the joint venture. The feasibility and the desirability of a joint venture must be assembled by careful analysis of the economic, political, social and cultural environment within which the venture will be implemented and managed.
A joint venture (JV) is a business agreement in which the parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets. There are other types of companies such as JV limited by guarantee, joint ventures limited by guarantee with partners holding shares.
Companies typically pursue joint ventures for one of four reasons: to gain faster entry into a new market; to acquire expertise; to increase production scale, efficiencies, or coverage; or to expand business development by gaining access to distributor networks.
On the other side, A partnership business is an arrangement where parties, known as partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations. It is also an association of two or more persons to carry on as co-owners of a business for profit. Partnerships are sometimes used in small retail, service, or manufacturing companies. It is fairly easy to form, and they are form simply by a verbal agreement, or more formally, by written agreement.
- STATEMENT OF PROBLEM
Though, Partnering among small scale business owner can be complex and it also takes time and effort to build the right relationship, and as a result of this partners are more likely to encounter challenges ranging from the objectives of the venture which are not 100 per cent clear and communicated to everyone involve, the partners having different objectives for the joint venture, high level imbalance in levels of expertise, investment or assets brought into the venture by the different partners, different cultures and management styles which is likely to result in poor integration and cooperation between the partners, and finally the partners may not be able to provide sufficient leadership skills and support in the early stages of coming together as partners being that most of the partners are manager of their various stage and are finding it hard to adapt to the partnership/or joint venture rules and regulation.
The Nigeria small scale business industry is one of the most dynamic, risky, challenging and rewarding business sector in Nigeria (Mills, 2001). As any other major sectors, it is exposed to a lot of predictable and unpredictable risks when engaging in a joint venture or partnership businesses. Among the risks faced by the the small scale sector are ownership risk, management and capital funding risk, economic risk, technology risk and social risk. Even though Risk is inherent in every partnership business and normally assumed by the owners unless it is transferred to or assumed by another party for fair compensation, it is also a challenges which pose a great danger for small scale business owners who may wish to come together to form a joint venture or partnership business if not deal with in the best possible way.
Non-Access to International Marketing: International marketing is a multinational process of planning and executing international marketing standards for pricing, promotion, distribution of ideas, goods and services to create exchange that satisfy individual and organizational on national and international level (Kottler, 2009). Firms expand into international markets slowly and deliberately over time for the market that are familiar to their home market, in order to participate effectively in global markets, SMEs are required to have and maintain significant capabilities in different areas ranging over the industry value chain, including production, design, distribution, branding, and marketing, as a result of this challenges small scale has tremendously find themselves merging or combining personal business capital together, sharing business ideas through establishment of a partnership/joint venture business in order to have access to international marketing and gain worldwide recognition.
1.3 OBJECTIVE OF THE STUDY
The Objectives of this study are as follows;
- Assess challenges facing Small Medium Enterprises (SMEs) towards establishment of Partnership/joint venture business in Nigeria.
- Eliminate the constraint encountered by small business owners in partnership/joint venture business in Nigeria.
- Determine the economy effect of partnership/joint ventures in Nigeria.
- Ascertained the benefits and importance of setting up a partnership business by small business owners.
- Provide useful insight on the concept of partnership business, it merit and demerit, as well as importance to the growth of the business.
- Identify the key actors key actors and facilitators for establishment of new partnership business in Nigeria.
- RESEARCH QUESTION
The research question provides a framework and guidelines through which substantial knowledge of the research study can be understood.
The research question asked includes:
- What are the challenges facing Small Medium Enterprises (SMEs) towards establishment of Partnership/joint venture business in Nigeria?
- What are the constraints encountered by small business owners in partnership/joint venture business in Nigeria?
- Are there any economy effects of partnership/joint ventures in Nigeria?
- What are the benefits and importance of setting up a partnership business by small business owners?
- Are there any useful insight on the concept of partnership business, it merit and demerit, as well as importance to the growth of the business?
- Who are the key actors key actors and facilitators for establishment of new partnership business in Nigeria?
1.5. SIGNIFICANCE OF THE STUDY
Though, the reasons behind forming a joint venture include business expansion, development of new products or moving into new markets, particularly overseas, yet there’s a need to also consider the negative aspect of it when setting it up.
This studies would be relevant to small business owners who may want to agree to setup a partnership business with another business in a limited and specific way, or small business owners who may also wish to agree to come together in order to generate large profit for their business as a result of desire for expansion.it will also be useful for partners who wish to set up a separate joint venture business, possibly a new company, to handle a particular contract.
1.6. SCOPE OF THE STUDY
The research work has focused on SMEs because these firms in Nigeria account for more than 90% of the country’s business, though many studies have been conducted on small-scale, but none of them has looked at the partnership/joint venture establishment in small scale businesses. It is for this reason that our study seek to Assess and evaluate the effect of partnership business on small business enterprises in Osun Metropolis.
The activities of the regulating body Small and Medium Scale Enterprises Development Agency of Nigeria (SMEDAN),were also put into consideration. However, the research was limited to small and medium scale enterprises operator in osun metropolis due the schedule of the researcher.
1.7. LIMITATIONS OF THE STUDY
As with all studies, limitations exist and must be acknowledged. Moreover, the outcomes were based on the information solicited from the respondents and such might be subjected to human errors, omissions and possible mis-statements.
The limitations of the study are as given below:
- also the difficulty of timely availability of published data from various government and other agencies doing this job in our country. Researcher also faces the problem on account of the fact that the published data vary quite significantly because of differences in coverage by the concerning agencies.
- The study could not show the whole scenario of the all small scale business in Nigeria.
- The questionnaire was not understood by some respondent.
- Some respondent did not give enough concentration to understand the significant of analysis.
- The time was not enough to collect the data from the respondent.
1.8. DEFINITION OF TERMS
- SMALL SCALE BUSINESS
It is defined as any business undertaken, owned, managed and controlled by not more than two entrepreneurs, has no more than twenty employees, has no definite organizational structure (i.e all employees report to the owners) and has relatively small shares of its market.
- joint venture (JV)
This is a business agreement in which the parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets. There are other types of companies such as JV limited by guarantee, joint ventures limited by guarantee with partners holding shares.
- Partnership business
This is an arrangement where parties, known as partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations.
- Partnership Agreement:
This is a written and formal document which contains such basic information as the name and principal location of the firm, the purpose of the business, and date of inception.
- Mutual agency
This means that each partner acts on behalf of the partnership when engaging in partnership business. i.e. The act of any partner is binding on all other partners.
- Joint Property Interest
This is a situation whereby each joint venturers participant contributes property, cash, or other assets and organizational capital for the pursuit of a common and specific business purpose. Thus, an IJV is not merely a contractual relationship, but rather the contributions are made to a newly formed business enterprise, usually a corporation, limited liability company, or partnership.
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