Factors affecting the productivity of manufacturing enterprises in case of wolaita sodo town

FACTORS AFFECTING THE PRODUCTIVITY OF MANUFACTURING
ENTERPRISES IN CASE OF WOLAITA SODO TOWN
BY: TESFAYE MADDA
Nov, 2017
Ethiopia

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Abstract
The general objective of this study was to identify the factors affecting the productivity of
manufacturing enterprises in the case of Wolaita Sodo Town. The study used descriptive
research design. The researcher used census since the number of population is small. For this
study purposes, both primary and secondary data were used. In addition to this, both qualitative
and quantitative data types were also used. The researcher used researcher assisted
questionnaire and semi-structured interviews were used under primary data sources. Primary
source of data were collected through closed-ended questionnaires and semi-structured
interview. Secondary source of data were collected from books, research paper and related
material.

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ACKNOWLEDGEMENTS
First of all I would like to thank the Almighty God for His permission to realize my study and
His mother St Marry for Her help throughout my life. I would then like to express my deepest
appreciations to those who have helped me to complete this project paper. I would like to extend
my gratefulness to my friends for their support to complete my study. I owe my earnest thankful
to my families for their unreserved help, care and encouragement throughout my study.

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Table of Contents
Contents Pages
Abstract ---------------------------------------------------------------------------------------------------------i
Acknowledgements-------------------------------------------------------------------------------------------ii
Table of Contents---------------------------------------------------------------------------------------------iii
List of tables---------------------------------------------------------------------------------------------------v
CHAPTER ONE
1. INTRODUCTION----------------------------------------------------------------------------------------1
1.1.Background of the study--------------------------------------------------------------------------- 1
1.2.Statement of the problem --------------------------------------------------------------------------1
1.3.Research Questions --------------------------------------------------------------------------------2
1.4.Objective of the study------------------------------------------------------------------------------3
1.4.1. General Objective--------------------------------------------------------------------------3
1.4.2. Specific Objectives-------------------------------------------------------------------------3
1.5.Significance of the study---------------------------------------------------------------------------3
1.6.Limitations of the Study----------------------------------------------------------------------------3
1.7.Delimitation of the study---------------------------------------------------------------------------4
1.8.Organization of the Research Paper--------------------------------------------------------------4
1.9.Operational Definitions ----------------------------------------------------------------------------4
CHAPTER TWO
2. REVIEW LITERATURE--------------------------------------------------------------------------------5
2.1.Definition of Manufacturing Enterprise ---------------------------------------------------------5
2.2.Importance of Manufacturing Enterprise --------------------------------------------------------5
2.3.Problems of Manufacturing Enterprise ----------------------------------------------------------6
2.4.Concept of Factors Affecting Growth of Manufacturing Enterprise ------------------------8
2.5.Special contribution of Manufacturing Enterprise in Ethiopia------------------------------10
2.6.The Concept of Manufacturing Enterprise s’ Performance----------------------------------11
2.7.Rationale for the Study----------------------------------------------------------------------------11
CHAPTER THREE
3. RESEARCH METHODOLOGY--------------------------------------------------------------------- 12

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3.1.Research Design ---------------------------------------------------------------------------------- 12
3.2. Descriptions of Study Area ---------------------------------------------------------------------12
3.3.Sources ---------------------------------------------------------------------------------------------12
3.3.1. Primary Sources---------------------------------------------------------------------------12
3.3.1.1.Questionnaire---------------------------------------------------------------------13
3.3.1.2.Interview--------------------------------------------------------------------------13
3.4.Secondary Sources---------------------------------------------------------------------------------13
3.5.Sampling Techniques -----------------------------------------------------------------------------13
3.6.Data analysis and Interpretation-----------------------------------------------------------------13
3.7.Ethical considerations-----------------------------------------------------------------------------14
CHAPTER FOUR
4. DATA PRESENTATION AND ANALYSIS-------------------------------------------------------15
CHAPTER FIVE
5. SUMMARY CONCLUSION AND RECOMMENDATION------------------------------------ 27
5.1.SUMMARIES--------------------------------------------------------------------------------------27
5.2.CONCLUSION------------------------------------------------------------------------------------27
5.3.RECOMMENDATIONS-------------------------------------------------------------------------28
REFERENCES

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List of Figures
Table 4.1: Age of the respondents ----------------------------------------------------------------------- 15
Table 4.2: Marital status of respondents ---------------------------------------------------------------- 16
Table 4.3: What makes you start business in Wolaita Sodo town? ---------------------------------- 16
Table 4.4: Types of business ------------------------------------------------------------------------------ 18
Table 4.5: Challenge for growth of Manufacturing Enterprise in Wolaita Sodo town ------------ 19
Table 4.6: Data presentation whether the sector get an opportunity of training or not ----------- 20
Table 4.6: Growth level of respondents business ------------------------------------------------------ 20
Table 4.7: Data presentation on access to credit and source ------------------------------------------ 21
Table 4.8: Response on access to Market --------------------------------------------------------------- 22
Table 4.9: Natural of competition in Manufacturing Enterprise ------------------------------------- 23
Table 4.10: Nature of promotion ------------------------------------------------------------------------- 24
Table 4.11: Data presentation on government support for small business -------------------------- 25
Table 4.12: Data presentation of governed action ----------------------------------------------------- 25

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CHAPTER ONE
1. INTRODUCTION
1.1.Background of the study
The advent of Manufacturing Enterprise is a very recent phenomenon in Ethiopian history. While
it has been argued by different scholars about it is potential of engine for any country in inspiring
the growth and development of economy (National Manufacturing Enterprise strategy of
Ethiopia, 1997). However, after the transitional government FDRE hand over the regimes it has
been able to see rays of hope shining over the development (ibid, 1997). As it has been
evidenced by the empirical experiences of certain developed countries Manufacturing Enterprise
are the stepping stone of the viable economic development agency is developmental organization
that was officially established by the regional government of SNNPR in number of 13/1998. The
overall objective of the agency is to ensure the creation of enabling environment for the
Manufacturing Enterprise, So that they strongly contribute to the economic and social
development of the region (Hawassa central state authority).
The major constraints facing Manufacturing enterprises are finance credit problem, lack of
work place, market problem, lack of managerial skill, problems related with tax, rent etc.
(SNNPR State Bureau of Trade, Industry and Transport, 2008).
Wolaita Sodo town is a commercial town where different opportunities are to be arranged
through expansion of small and micro enterprises. Despite this factor the rate of growth this
found to short of expectation (SNNPR Manufacturing Enterprise, manual 2003-2006).
Manufacturing Enterprise with a pond up capital not exceeding 20,000 excluding high
technological consultancy firms, while 1998 under the regulation “small enterprise” are business
enterprises with paid up capital not less than 20,000 and not exceeding 50,000 and excluding
high technological consultancy firms (ibid. 2003-2006). In light of the above justification in this
study, the researchers will attempt to identify factors affecting the growth of Manufacturing
Enterprise in Wolaita Sodo town.
1.2.Statement of the problem
In most developing countries, MSEs face constraints both at start up phases and after their
establishment. In Africa, for example, the failure rate of MSEs is 85% out of 100 enterprises due

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to lack of skills and access to capital (Fedahunsi, 1997:170-186). It is typical of MSEs in Africa
to be lacking in business skills and collateral to meet the existing lending criteria of financial
institutions (World Bank, 2004:29). This, according to World Bank, has created finance gap in
most markets. The MSEs are able to source and obtain finance mostly from informal sectors like
friends and relatives while medium or large enterprises obtain funds from banks. This unequal
access to finance by MSEs and medium and large enterprises has undermined the role of MSEs
in the economic development in African countries (World Bank, 2004:29).
The study conducted by Ethiopian CSA discloses that, the contribution of small enterprises in
creating job opportunities and in the development of our economy is vital (FMSEDA, 2006:13).
However, their contribution is very low in compared with that of other countries due to financial
problem, lack of qualified employees, lack of proper financial records, marketing problems, lack
of working premises and raw materials. Lack of information about market opportunities and
standards and regulations is one of the underlying factors that hinder their performance (Mulu
Gebreeyesus, 2009:10-13).
According to Zeleke Worku (2009:1-9) lack of integration between the vocational curriculum
taught at academic institutions and skills required at the workplace in small businesses and
enterprises is a major obstacle to the growth and development of MSEs.
Manufacturing Enterprise are considered as one of the principal driving force in the economic
development of a given country. They stimulate private ownership and entrepreneurial skills.
They also flexible and can adapt quickly to changing market demand and supply situation.
Further, they are the main ground for the generation of employment opportunity. Besides their
growth contribution, there are so many problems that affect their growth and expansion which
include, lack of initial capital, lack of business development services, lack of access to market,
lack of raw material, delay of credits and etc are some of them. So with the presence of the above
problems it is very difficult for the sector to achieve their primary goal of including poverty and
unemployment. Manufacturing Enterprise in Wolaita Sodo town are also one of the enterprises
supposed to be faced with the above listed problems.
Manufacturing industry sectors are highly dependent on imported inputs and dominated by light
affectedbylowlevel of laborproductivity,subsistence levelof underdeveloped agricultural sector, low
level of technology,poorinfrastructure,politicalunresti.e.periodic warthat Ethiopiaincurs,low capital
abundance, etc. These and other related problems make this sector to be under developed and
unsatisfactoryinitsperformance androle.The presentstudywill attemptin analyzing the performance

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of the LMS manufacturing industry since 2000-2007 E.C. In this respect the following issues will
discussed (Ministry of Finance and Economy, 2003).
To address above problems, this study therefore aims to provide a holistic view of factors
affecting the productivity of Manufacturing Enterprise s through a comprehensive review of
literature and empirical study available on the area. This resulted in the development of a
theoretical framework for the initiation of policies and programmes for enterprise development.
From the practical point of view, it serves not only to provide a self check to current enterprise
sector, but also to increase the involvement in business activities through a better understanding
of the determinants of the performance of the enterprises.
1.3.Research Questions
In this research the following research questions were answered
1. What are factors affecting the productivity of Manufacturing Enterprise in the town?
2. Is there any financial problems faced by Manufacturing Enterprise in the town?
3. Is there demand for the products of Manufacturing Enterprise in the town?
4. What are the internal factors that affect the performance of Micro and Small Enterprises in
the town?
1.4.Objective of the study
1.4.1. General Objective
The objective of the study was to assess the factor that affects the productivity of Manufacturing
Enterprise in Wolaita Sodo town.
1.4.2. Specific Objectives
The specific objectives of the study are:
1. To identify factors affecting the productivity of Manufacturing Enterprise in the
Town.
2. Assess the internal factors that affect the performance of Manufacturing Enterprises
in the town.
3. To identify factors affecting the performance of manufacturing enterprises in the
study area.
4. To analyze major operational problems of the manufacturing enterprises in Wolaita
Soddo town.

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1.5.Significance of the study
The finding of the study hopes to be significant in identifying the various problems of
Manufacturing Enterprise that hinder their growth.
o The researcher hopes that suggestion and recommendation of the study will help the
concerned body by providing high light of the information about the sector.
o Provide valuable information for government and their interested body to take some
corrective action
o The finding of the study will be important to the academicians and researchers who can
use it as a springboard for other researches/studies.
1.5. Scope of the study
The study was undertaken in Wolaita Soddo town of Wolaita Zone in Southern Nations,
Nationalities and Peoples Regional State (SNNPRS) of Ethiopia. The main aim of the study was
to assess the performance of manufacturing enterprises and identify the factors that affect the
performance of medium scale manufacturing enterprises in Wolaita Soddo town. The study was
concerned only with manufacturing enterprises established by government intervention and
actually registered by manufacturing Enterprises Development Office of Wolaita Sodo town.
This research covers the time between 2005 to 2009 E.C.
1.6.Limitations of the Study
Like all research, this study has limitations. The sources of difficulties encountered in this study
are described as follows: most of the documents that are concerned with micro and small
enterprises are written in Amharic. To translate in to the required instruction language (English)
takes longer period. Another problem countered in the study has to do with the operators
reluctance to cooperate due to suspicion that disclosing information may lead to negative effect
on their business. It is very important to note that these limitations did not have any significant
interference with the outcome of the study.
1.7.Delimitation of the study
Geographically the study was delimited to Wolaita Sodo town and the study focuses only on
factors affecting productivity of Manufacturing Enterprise in Wolaita Sodo town.
1.8.Organization of the Research Paper
The rest of the paper is organized as follows: chapter one is about the introduction of the study,
chapter two presents the related literature review to the study, while chapter three provides

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research methodology. Chapter four outlines data presentation, analysis and interpretation and
chapter five is about concludes and suggests some recommendations.
1.9.Operational Definitions
Enterprise: It refers to a unit of economic organization or activity whether public or private
engaged into the manufacturing of goods.
Factors: A factor is a contributory aspect such as politico-legal, working premises, technologies,
infrastructures, marketing, financial, management and entrepreneurial influences that affect
performance of micro and small enterprises.
Manufacture of food products: includes manufacture of vegetable, preparing ‘baltina’
products and manufacture of bakery products.
Manufacture of metal products: are an enterprises sector engaged in manufacture of fabricated
metal products, except machinery and equipment; manufacture of parts and accessories for
motor vehicles and their engines.
Manufacture of textiles and garment: is an enterprise sector engaged in preparation and
spinning of textile fibers, manufacture of carpets and rugs; manufacture of wearing apparel,
dressing and dyeing of fur.
Manufacture of wood and wood products includes manufacturing of furniture, joinery and
modern beehives.
Micro enterprise: means commercial enterprise whose capital is not exceeding birr 20,000 other
than high technology and consultancy services.
Performance: in this paper performance defined in terms of profitability of the MSEs.
Small enterprise: means a business engaged in commercial activities whose capital is exceeding
birr 20,000 and not exceeding 50,000 birr, other than high technology and consultancy service
institutions.

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CHAPTER TWO
2. REVIEW LITERATURE
2.1.Definition of Manufacturing Enterprise
The definition of Manufacturing Enterprise is still controversial. There is no generally accepted
definition of Manufacturing Enterprise. Manufacturing Enterprise in one country may be small
or medium enterprises in the other country. This it depends on the stage of economic
development of the country (Ageba, 2004).
The micro and small business sector is recognized as an integral component of economic
development and a crucial element in the effort to lift countries out of poverty (Wolfenson,
2007:28-39). The dynamic role of micro and small enterprises (MSEs) in developing countries as
engines through which the growth objectives of developing countries can be achieved has long
been recognized. It is estimated that MSEs employ 22% of the adult population in developing
countries (Fisseha, 2006:43).
In Ethiopian context the definition of Manufacturing Enterprise is given as a small business
enterprises found in all sector of country economy with a paid up capital (fixed asset) of not
more than 20,000 excluding high technological consultancy firms and other high technological
establishment while small enterprises are business enterprises with paid up capital not more than
birr 500,000 and excluding high technological consultancy firms and other high technological
establishment( Ministry of trade and industry, 2008).
2.2.Importance of Manufacturing Enterprise
According to Balve (2003) in a labour abundant and capital scarce country Ethiopia small
business have came to occupy a significant position in providing employment opportunities and
increase capital formation in the country. The following are some of the importance of
manufacturing enterprise.
The employment potential: - manufacturing enterprises are labour intensive comparatively and
thus create more job opportunities per unit of capital employed. It is therefore that leaving a side
highly capital intensive industries involving most sophisticated technological and the building up
of economic and social infrastructural facilities it is which help enlargement of job opportunities
(ibid 2000).

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Distribution of income: - the income generated in large number of Manufacturing Enterprise is
depressed more widely in community than income generated in a few large enterprises. Thus, the
income benefit of Manufacturing Enterprise is derived by a large segment of population while
the large enterprises encourage monopoly capital and concentration of economic power in this
way, Manufacturing Enterprise about an equal distribution of income and wealth (ibid, 2000).
Foreign exchange earnings: - small businesses facilitate substantial foreign exchange savings
and earnings. A wide variety of consumer and simple procedure good can be procedure
economically on Manufacturing Enterprise basis.
Economic transformation: - Manufacturing Enterprise play strategic role in the progress of a
country. These include the industries by large represent a stage in economic transition from
traditional to modern
2.3.Problems of Manufacturing Enterprise
According to Balu (2000) small face many problems in the area of their operation.
Shortage of raw material; procurement of raw materials of required quality, and quantity
competitive price is the most serious faced by this sector. Though the institutional arrangements
regard to the allocation mechanism often work against the interest of these. This is more
pronounced in the case of scare raw materials that have to be imported. Besides, frequent
interruptions in the availability of essential raw materials prevent fuller and economic utilization
of productive capacity of small units (Simon Bridge, Ken O’Neil and Stan Cromie, 2003)
Inadequate finance: - Most of the Manufacturing Enterprise depends on external finance or
non-institution. Financial assistance by the various agencies, like financial corporations and
commercial bank, often falls much short of their requirements. In order to supplement the
institutional finance Manufacturing Enterprise have to approach the unorganized money market
at terrible heavy rates of interest or on suppliers credit on exceedingly unfavourable terms
Private finance, ultimately spoil the unit and cause for sickness in the small business (Balu,
2000).
Outdated method of production: - Most of small scale business in developing country has
production method of low technological level. Modern techniques which have revolutionized the
industrial production in the relatively highly industrialized countries are yet to be an integral part
of the sector. Thus, old method of production has resulted in their continued low productivity
and poor quality of the good (ibid, 2000).

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Lack of managerial skills: - Small business are owned by one person or small group of people
and managed by their owners, who with all management usually with the other little help. In our
country most of Manufacturing Enterprise launched without a feasibility report. Moreover,
wherever such reports were prepared, the purpose was to use them as advice to obtain
institutional finance than to serve as a plan to make the unit a success. Though majoring of the
entrepreneur possess production skills, there are weak in aspects like marketing, finance,
personnel management, general administration, accountings, and public rapport. The lack
resource to employee techno craft to handle these matters (Terry Hill, 1987).
Lack of marketing facilities: - Manufacturing Enterprise entrepreneur faces problems in the
matter of marketing his product. Due to want to adequate co-operative or other marketing
facilities and intelligence often suffers from remunerative price of their goods in the open market
(Burn, 2001). In free market economy especially with stiff competition marketing is a key factor
for the success of small business (Gebretinsae, 2003).
Beside, a bulk of units are engaged the production of consumer grads where tastes,
Altitude needs continue to change with quick frequencies. In this matter, this unites
Suffer from inadequacy of market research, intelligence and a good information system. Even
when this information is available, these units lack flexibility to adopt themselves to the
changing situation (Hill, 1987).
Competition from large scale enterprises: - though the government has reserved certain items,
for exclusive production by small business, there is complete violation of this rule by large scale
enterprises. The Manufacturing Enterprise find almost impossible to complete with large scales
strategy. Using latest production technology and having access to all modern facilities of
managing industrial unit are in a position to easily out sell the Manufacturing Enterprise sector.
For the letter it is always a losing proposition (Balu, 2000).
According to Bhatia & Batra (2000)comparatively the level risk ,start –up challenge and
requirement for small business given a room for competitors to inter small business, sooner
he/she find some others similar business opens just at their idea. Business engaged similar type
of business sector and those sectors compete in the market through reducing price in order to get
customer for their products and service. Because of this they give little emphasis for the quality
of their product and service as a result they lose their customer (industrial development, 2003).
Promotion: - promotion is creating a positive attitude in the mind of customer about product and
service that company or business enterprises provide for customer (Gebretinsae, 2003). It is

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believe that there are many users of micro and small business product and service who would
buy if they know about them. Most of the time, the quality, quantity and price would suit the
need of many and potential supplier would also be willing and able of provide what is required
but, neither side is aware of the existing possibilities this is because of the fact that, there is lack
of aggressive awareness campaign/promotional practice about Manufacturing Enterprise
products and services need to the public (Ibid, 2003).
Government Support:-for successful development of small business government involvement
is the essential one Manufacturing Enterprise face difficulties at every stage of their activities,
whether it is buying materials for production, organization of production, selling products in the
market or sustaining the period between production and marketing. The run a new venture or
operating already established enterprise the government support in different issue like; reducing
tax, creating available market place rewarding business which better for development of the
country economy (Kuelhl, 2000). According to the Nicholas (1997) the development of the small
business is supported by various government policies of the country that contribute for that area
as well as country.
2.4.Concept of Factors Affecting Growth of Manufacturing Enterprise
Industries experience cycles of economic growth and contraction based on many factors. These
include the overall health of the markets, consumer preferences and even seemingly unrelated
world news and events. Although some companies perform better than others in their industry,
the global factors that affect the industry as a whole must be contemplated when planning to start
or grow a business.
Interest Rates
Interest rates can impact the growth of an industry in several ways. In large-ticket industries such
as vehicle manufacturers or cruise companies, an increase in interest rates can prevent customers
from borrowing to finance the purchase of these types of products and services. High interest
rates also deter companies from investing in new capital and expansion. On the other hand,
falling interest rates can stimulate industries to grow, which can lead to innovation and higher
employment levels.
Currency Strength
The value of the U.S. dollar compared to other foreign currencies such as the Yuan, yen and the
pound is important even for companies that do not import or export goods. Consumers have a
choice to purchase goods or services originating in the United States or in other countries. If the

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U.S. dollar strengthens, companies in the industry that purchase inputs from other countries are
able to be more competitive in pricing. In industries that are heavily reliant on foreign raw
materials and processing, such as the clothing industry, the entire sector can be lifted or
depressed with a strengthening or weakening of the dollar.
Government Intervention
Many industries are regulated by the government in one form or another. Government agencies
such as the Environmental Protection Agency, the Food & Drug Administration or the U.S.
Department of Agriculture maintain standards that all operators in an industry must follow for
the safety of consumers, employees, or natural resources. Some industries are more heavily
regulated than others and new laws and rules can shake up an entire industry and depress growth.
For example, new child toy safety laws implemented under the Consumer Product Safety
Improvement Act in 2009 threatened to wipe out many small toy producers as the requirements
to test and certify the toys were cost-prohibitive to all but large toy manufacturers. Proposed
changes to the Act may help alleviate the burden on small manufacturers and resellers.
Environmental Impact
Economic growth in an industry can be impacted not only by the environmental effect the
products or services have but also by consumers' perceptions of that impact. For example, the
market for fur apparel declined drastically over the course of a few years in the 1990s when
consumers perceived that raising and killing small animals for their fur was both inhumane and a
poor use of land. Although the industry is once again picking up with international demand, the
number of fur farmers in the country has substantially declined. If the public views an industry's
products or services as being harmful or unsafe, most companies within the sector can
experience a marked decline in sales quickly.
Overall Economic Health
The economic state of the country and consumer confidence can also spur growth and
development or harm it. In recessionary times, consumers begin limiting their purchases to the
essentials, foregoing luxury or big-ticket items. Companies also scale back production, hiring
and the development of new products and services to ensure that their finances can weather the
storm. In periods of overall economic growth, these companies once again expand. The opposite
is true in industries that deal in basic consumer goods that everyone needs regardless of the
economy: food, diapers, and staple goods. Demand picks up for these necessities as consumers
stock up on them and substitute basic goods for luxury goods (example: people buy more

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groceries to eat in rather than go to a restaurant). In inflationary times, the demand for staple
goods declines as consumers can afford more luxury substitutes.
2.5.Special contribution of Manufacturing Enterprise in Ethiopia
As a part of business community, small firms welfare. They produce a sustained portion of our
total goods and services. Thus, their general economic contribution is similar to that of big
business, small firms, however, possess than quality that make them more than immature
variation of big business corporations. They make exceptional contribution as they provide new
jobs, introduce innovation, big aid business, stimulate competition, and produce goods and
services efficiently (Hayla, 2003).
Provide new jobs:-As the population grows, small businesses provide new job opportunities. It
seems clear that small business provide “Lion’s share” of new jobs, some time adding jobs while
large corporation are “Downsizing” and laying off employees (ibid, 2003).
Introducing innovation: - New product that originate in the research laboratories of big
business make valuable contribution to our standard of living. There is question, however, as to
relative importance of big business in achieving the truly significant innovations. The record
shows that many scientific betake through originated with independent investors and small
organizations. Studies of innovation have shown the greater effectiveness of small firms in
research development. Innovation contributes to productivity by providing better products and
better method of production (Lasser, 1989).
Stimulation economic competition: - According to Haylay (2003) many economists, beginning
with A. smith, have expounded the values inherent in economic competition. In a competitive
business situation, individuals are driven by self interest to act in a socially desirable manner.
Competition acts as the regular for that transforms their selfishness in to service. When produces
consists of only a fief big business, however, the customer is at their mercy .They may set high
price, with hold technological developments and exclude new competitors or otherwise about
their position of power.
Aiding big business: - the facts that function as more expertly performed by small business
enable small firms to contribute the success of large ones. If small business were saddled with a
myriad of activities , that they should perform only in efficiently .Two function s that small
business are the distribution and supply function (ibid,2003).
Producing goods and services efficiently: - The continued existence of small business
competitive economic system is in itself evidence of small business operation .If small firms are

12
hopeless and inefficient , they will make no useful contribution .They would be forced out of
business quick by stronger competition . We believe that small business contributes in a
substantial way to the economic welfare of our society (Lasser, 1989).
2.6.The Concept of Manufacturing Enterprise s’ Performance
According to Martin (2010:67) performance is defined simply in terms of output terms such as
quantified objectives or profitability. Performance has been the subject of extensive and
increasing empirical and conceptual investigation in the small business literature (Bidzakin K.J.,
2009:31). The issues that remain unresolved are the goals against which performance should be
assessed and from whose perspective the goals should be established (Etzioni, n.d:128).
2.7. Rationale for the Study
The rationale for selecting this study is based on an appreciation that the findings of a study
which aims to create meaningful results on the economic development and help reduce poverty.
Micro and small enterprises in Ethiopia provide goods and services in promoting innovation and
enhancing the enterprise culture, which is necessary for private sector development and
industrialization. This study with its stakeholders as owner managers would use the research
findings to predict the success or failure of the businesses, based on the orientations prevalent,
and therefore choose what would be best outfit for their practice.
2.8. Measure of the Performance of Manufacturing Enterprises
Performance: Performance is defined as act of performing; of doing something successfully;
using resources. Measure of performance of manufacturing enterprises is used to the condition
performing level of enterprises (GEM, 2004). The benefit cost ratio was employed to measure
the performance of micro enterprises. The benefit cost ratio analysis estimates and totals up
the equivalent money value of the benefits and costs of the enterprises.
Benefit cost ratio Annual total benefit (1)
–––––––––––––––
Annual total cost
Where:
Total benefit: Total benefit is the sum of the benefits earned from performing different
activities to sustain the business. The higher the total benefit of the enterprises the higher
benefit cost ratio is likely to be. It is considered as the base or primary success of enterprises to

13
exist in the business (Benjamin and Bonno, 2007).
Total cost: Total cost is made up of fixed costs and variable costs. Fixed costs are consisting of
payments for rent and interest. Variable costs are comprising payments for electricity, water,
telephone, wages for technicians and miscellaneous payments all summed up to total costs. If
the total cost of enterprises ultimately increases more than total benefit of the enterprises, it
results low benefit cost ratio of the enterprises. Uncontrolled operational costs and high non-
returnable costs flow results in low performance of enterprises (Padachi, 2012).

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CHAPTER THREE
3. RESEARCH METHODOLOGY
3.1.Research Design
The main objective of this study was to survey the problems related to the growth and expansion
of Manufacturing Enterprise in Wolaita Sodo town. To achieve this objective the researcher used
survey descriptive research design.
3.2. Descriptions of Study Area
Wolaita is one of the fourteen zones of the Southern Nations, Nationalities and Peoples’
Regional State (SNNPRS). Its administration town is Wolaita Soddo. The northern tip of the
boundary of Wolaita is at about 360 km south from the capital Addis Ababa and 150 Km from
the regional city administration called Hawassa. It is bordered in the north by Hadiya and
Sidama, in the South by Gamo Gofa and Dawro.
Based on the data gathered by WODA in 2009 the population size and structure, the current total
population of the zone is 1,906,244 of which 795,950 are children (0-14years) 901,276 are
working age population and 29,352 are old age (65+1) population, women of reproductive age
(15-49) are 42,572. The current average population density of the Zone is 428.2km2.To alleviate
the population increment problem, about 276,695 females and 57,956 males have been using
different contraceptive methods.
The major economic activities are agriculture (production of legumes, root crops and some
cereals – predominantly maize), and livestock rearing. According to the census made in 1999
E.C, it is estimated to be 1.65 million. When it is split in sex, 50.73% are male and 49.27 % are
female. Its annual growth rate is 2.9%. Among the whole people, the productive group ranges
from ranges 15-64 and this in 50.2% and non-productive.
3.3.Sources
The study was carried out using both secondary and primary data. The tools the researcher will
use to collect the primary data include: interview and questionnaire.
3.3.1. Primary Sources
In order to realize the target, the study used well designed questionnaire as best instrument. This
is completed by the owner managers/or operators of the enterprises. Besides face to face
interviews with the Manufacturing Enterprise s operators /and the relevant owner managers who
heads the enterprises in the selected sectors. The interview method of data collection was

15
preferred due to its high response rate. That is it gives the two people concerned an opportunity
to interact and get details on the questions and answers. Through interviews, clarification of
issues is easily achievable leading to accuracy of data from the respondents.
3.3.1.1.Questionnaire
The researcher designed a questionnaire consisting of structured questions with a mixture of
verbal probing questions for respondents with their own language. The questionnaire was used
because it is specific for the respondents to explain the exact situation without giving room for
unnecessary and irrelevant information for the study topic.
3.3.1.2.Interview
Interview guides targeted at different groups for the field research prepared. In this research, the
researcher used flexibility in interview depending on the understanding of the respondents.
Accordingly, the researcher used this instrument to collect the desired data from those who were
experts. In this case, the researcher used the interview schedule to guide the discussion with the
respondents who are key informers and thus needed to elaborate on several issues.
3.4.Secondary Sources
Secondary data from files, pamphlets, office manuals, circulars and policy papers was used to
provide additional information where appropriate. Besides, variety of books, published and/or
unpublished government documents, websites, reports and newsletters will be reviewed to make
the study fruitful.
3.5.Sampling Techniques
The sampling technique the researcher used carry out this study is stratified random sampling.
The main reason for using stratified random sampling is small and micro enterprises of Wolaita
Sodo town have different income, budget and sector under its supervision. From all the
Manufacturing Enterprise the researcher took 30 samples. But 0nly 27 questionnaires were
collected.
3.6.Data analysis and Interpretation
In this study descriptive data analysis method was used. The descriptive analysis method is used
to describe the results that were obtained to provide a summary of what was gathered. Visual
representations charts and tables were employed to describe data gathered through questionnaire
and interview. Participants’ responses to all items in the questionnaire will be organized into

16
groups according to their frequency. Then the responses was tabulated and described in terms of
their frequency and percentage.
3.7.Ethical considerations
The researcher considered the research values of voluntary participation, anonymity and
protection of respondents from any possible harm that could arise from participating in the study.
Thus the researcher; will introduce the purpose of the study as a fulfillment of a Degree’ Study
program and not for any other hidden agenda by the researcher and requested the respondents to
participate in the study on a voluntary basis and refusal or abstaining from participating was
permitted. The researcher also assured the respondents of confidentiality of the information
given and protection from any possible harm that can arise from the study since the findings
were used for the intended purposes only. The respondents are to be provided with feedback
about the findings of the study.

17
CHAPTER FOUR
4. DATA PRESENTATION AND ANALYSIS
Questionnaires were distributed out of this 27 were collected and the rest are not collected due to
different reasons. The analysis based on the collected questionnaires is described level below.
What we observe from the above diagram is that 94.8 %( 22) of respondent are male and 4.2 %(
5) are female .this shows that the respondent are male dominated.
Table 4.1: Age of the respondents
Age internal Number of respondents Percentage
18-35 16 59.26%
36-55 9 33.33%
56-65 2 7.41%
>65 0 0
Total 27 100%
Source: Own Survey, 2017
The information obtained from above is about age of the respondents 59.26 %( 16) of the total
population is found in age internal of between 18-35, Followed by those respondents which
found between 36-55 constituting around 33.33%(9)of the total respondent .the remaining one is
7.41%(2)of the respondents are found in age internal between 56-65. The show hat majority of
the respondents are found on the age of productive. As it is shown in the above graph 33.33 %(
9) of the total respondents are less than grade twelve <12th), 44.44 %( 12) eve diploma holders
and 22.23% (6) of the respondents are degree holders from this most workers are found in low
level of educational status.

18
Table 4.2: Marital status of respondents
Marital status Number of respondents Percentage (%)
Married 18 66.67%
single 6 22.22%
Widowed 3 11.11%
Divorce 0 0
Total 27 100%
Form the above table what observed is that the majority of respondents are unmarried in the
marital status .constituting around 66.67% (18)of the total respondents .this followed by those
respondents whose marital status is marital converging for about 22.22%(6)of the total
population .the remaining 11.11%(3)of the respondents are windowed.
Basic business information
Table 4.3: What makes you start business in Wolaita Sodo town?
Question Number of respondent Percent %
What makes you start business in Wolaita
Sodo town
Market opportunity 13 48.15%
Governmental encouragement 8 22.22%
Availability of raw material 6 29.63%
Only for moral satisfaction 0 0

19
Total 27 199%
Form table 3 we can see that about 48.15% (13) of the respondent have started business by
looking market opportunities while 6(22.22%) from total sample population have started
business by availability of raw material about 29.62%(8) respondents start their business by
government encouragement .to start up a venture the firm need market access for its product
availability raw material, support from family social and government information and advice.
From the above table it is possible to conclude majority of Manufacturing Enterprise in Wolaita
Sodo town entered in to the business looking of high market government support, and
availability of raw material respectively.
As if is show in the above graphical representation most of the respondent initial capital is range
from 1000-5000. Which cover around 29.635(8) of the total population ,followed by capital
range between 10,000-20,000 and ?300,001 cover the same percentage of 22.22%(6)the
remaining 14.48%(4)respondent and 1.45%(3)covers initial startup capital of 5001-10,000 and
20.001-30,000 respectively.

20
In Ethiopia the business with capital of less than 500,000 birr categorized under small business
generally the initial capital of micro growth and expansion, since the level of their business
capital town is limited to be extent of their initial capital.
Table 4.4: Types of Job
Response Total population Percentage %
Merchandise 11 40.74%
Construction 3 11.11%
Urban agriculture 3 11.11%
Service delivery 8 29.64%
Others 8 7.40%
total 27 100%
The assessment that is made on the number and types of business that the respondent are
currently running are current running directly dependent on the sample size that the researcher is
driven as it is shown in the above table the majority of respondents are engage in merchandise
type of business which constitute 40.74%(11)service is another business sector that constitute
29.64%(8)next to merchandise ,the remaining industry urban agriculture construction and service
delivery sector constituting 11.11%(3), 11.11%(3) and 7.4%(2),respectively. According to bridge
ONeil and Crome (2003) small business are owned by one person or by small group of people
and managed by their owners who with all management issue usually with little other help. As it
is shown in above diagram 77.78 % ( 21) of the total. Respondent business are managed by one
individual who does not have managerial skill and only 22.22%(6)of the respondents business
are managed by one individual who have the required managerial skill.

21
This show that absence of managerial skill is the major bottleneck of Manufacturing Enterprise
in Wolaita Sodo town .The problem further results in Misallocation of resources .failure to
resource conflict between workers, failure to know the internal strength and weakness and also
external opportunities and thereat of the business and etc. which restricts the growth and
expansion of the business indirectly.
Table 4.5: Challenge for growth of Manufacturing Enterprise in Wolaita Sodo town
Question Respondent
Number Percentage
What challenges you face while running
your business in Wolaita Sodo town
financial problem 18 66.67
Market availability
Lack of infrastructure
Lack of access to market 9 33.33
Government action
Total 27 100
Based on the above respondent provides it is possible to inter that the most severe problem that
Manufacturing Enterprise have faced while running their business where financial problem
which account 66.67% (18) followed by market access which constitute 33.33 %( 9) form the
total respondents. According to Balu (2000) small business face problem in which they operate
in addition to the above like shortage of raw material in adequate finance out date method of

22
production lack of managerial skills and computation from large scale enterprises and others.
Finally the great problem regarding financial problems and market unavailability that hinder
growth and expansion Manufacturing Enterprise in Wolaita Sodo town
Table 4.6: Data presentation whether the sector get an opportunity of training or not
Response Total population Percentage
Yes 3 11.11%
No 24 88.8%
Total 27 100%
The number of relevant training program made a variable to Manufacturing Enterprise in
Wolaita Sodo town have been very minimal .As it is show in the above table only 11.11%(3)of
the total respondents get an opportunity of training ,The remaining which is the largest
percentage 88.89%(24)of the respondent are no getting an opportunity of training . The general
lack of awareness about the spread of an already existing facility and what they offer to small
enterprise sector or those interested in a business career constitute one of the major or short
coming of the whole training program.
Table 4.6: Growth level of respondents business
High 3 11.12%
Moderate 10 33.03%
Slow 14 51.85%
Total 27 100%

23
As it is depicted in the table around 51.85% (14)of the Manufacturing Enterprise in Wolaita
Sodo town shows slow rate of growth level which is followed by moderate growth level account
for 37.03% ,(10%)of the total respondents. The remaining 11.12% (30) of the respondents replies
that their business growth level fast .The shows that most of the Manufacturing Enterprise in the
town are not growing at an expected rate. The respondents are also asked the main reason for
show and stagnant growth level of their business and they mention major problem like.
 Lack of access to market
 Lack of startup capital
 Lack of training on low to raise the growth level of their business
 Lack of skilled manager
Table 4.7: Data presentation on access to credit and source
Respondent Total population Percentage
Yes 11 40.74%
No 16 59.26%
Total 27 100%
Source of credit it
Bank 5 21.73%
Small saving and credit association 15 65.21%
Interested individual who give loan 3 13.06%
Total 23 11%
As it is indicated in the above 59.26% (16) of the respondents does not have an access to credit
and only 40.74% (11) of the respondents have an access to credit from those respondents having

24
an access 65.21%(15) get the access from small saving and credit association which is followed
by those respondents who get an access from bank accounting for 21.73% (5) the remaining
13.06% are from interested individual who give loan.
According to Balu (2000), most of small business depends on external finance or non –
institutional like financial corporation commercial bank credit association .In order to
supplement the institutional finance. Generally form the above we conclude that Manufacturing
Enterprise in Wolaita Sodo town cites lack of access to credit as a greatest constraints to their
growth and expansion whether they are formally established or not. The financial need of
different types of business is also very with access problem particularly server for the start up
enter price.
Table 4.8: Response on access to Market
Yes 9 33.33%
No 18 66.67%
Total 27 100%
In a free market economy especially with stiff competition marketing is a key factors for the
successes of Manufacturing Enterprise (Gebertinsae, 2003) As stated on the above table
66.67%(18) of the respondents in the access to market .This shows that sector are facing a
serious problem related to its access to market .The respondents are asked to mention some of
the contributing factors for the problem and they cite problem like
 The area in which most of Manufacturing Enterprise operations undertaken their
business activity is not found in the center of the market.

25
 The customer is not information centers which furnish market related information in
such area as information in such area as information on price, source of input existing
and potential market customer need and etc.
 Lake of adequate marketing channel through which they could market their Output and
etc …….some of the factor.
Generally geopolitical location of the town is attractive for different business expansion so
conducting appropriate research about market demand of Manufacturing Enterprise may lead to
market success of the sector.
Table 4.9: Natural of competition in Manufacturing Enterprise
Yes 23 55.18%
No 4 14.82%
Total 27 100%
According to Batrh(2003) comparatively the level of risk start up Challenges and requirements
for small business given room for competitors to enter small business. In our local one might
identify on similar business opens just at their business ideas. As it stated in the above table
85.18% (23), of the mist operators responds that their business face a sever complication on the
market and only 14.52% (4), of the sector operator business are free from these problems.
Respondent are also asked their major competitors majority of their competitor arise from
domestic which constitutes 92.6 %( 25) remaining 7.5 %( 2) account for foreign competitors.
From this what was concluded are most of Manufacturing Enterprise in Adams Town face great

26
completion in the town and their majority of competitors are dominated by the domestic
competitors.
Table 4.10: Nature of promotion
Yes 9 33.33%
No 18 66.67%
Total 27 100%
Main reason for lack of promotion
Lack of finance 13 48.14%
Lack of skill 9 33.33%
Others 5 18.53%
Total 27 100%
As it is be live that there are many users of small business product and services who would buy if
they knew about them most of the time .The quality quantity and price would suit the need of
many and potential supplies would also be willing and able of provide what is required but
neither side is aware of the existing possibilities .This is because of the fact that ,there is lack of
aggressive awareness campaign or promotional practice about Manufacturing Enterprise in
Wolaita Sodo town also the face the same as stated on the above elucidated by Haily (2003)
According to the investigation made 66.67% (18) of the total population responds that they
didn’t made any promotional practice to their products and services only 33.30 % (9) of the
respondents make promotion about their products and services and they replied that lack of
finance and lack of necessary skills are their main problem .which constitute about 48.14%(13)

27
and 32.32%(9) respectively. The remaining 18.53 %( 5) is other problem like lack of access to
media to get at low cost in their closer areas.
Table 4.11: Data presentation on government support for small business
Response Total population Parentage
Yes 12 44.44%
No 15 55.50%
Total 27 100%
According to Nicholas (1997) the development of small business supported by various
government policy of the country of that contributes for that area as well as the country
development. As it can be seen from the above table from total population, 44.44 %( 12)
responds that government support their business running and the remaining 55.56 %( 15) is
accounted for those respondents who responds the government does not support their business.
The respondent are also asked what type of support government provides to them .some of them
are reducing tax, encouraging the sector to start by providing lands market advantage and loan
availability. Generally the support of government in town toward the sector is less, for success
fullness of business, it needs support from different part internally and externally, beside this
government support is the essential one.
Table 4.12: Data presentation of governed action
Yes 10 37.04%
No 17 62.96%

28
Total 27 100%
Kuehl (2000)state that to run a new venture government indolent is essential thing .The
government support some business by reducing tax, crating available market place rewarding
business by provide better for development of the country . In this study 37.04% (10) of the
respondent claimed that government activities influence their business and 62.96% (17)
respondent that there is no government activity which affect their operation. Respondent are also
asked to mention some of the problem and they cite problem such as bureaucratic process to get
license .The mandatory requirement of 10 individual to form one group also affect their
operations.

29
CHAPTER FIVE
5. SUMMARY CONCLUSION AND RECOMMENDATION
5.1.SUMMARIES
The aim of this study was to investigate the factors that affect the growth of manufacturing
enterprise. To this end, questionnaires were developed and addressed to respondents so as to
know factor that affect Manufacturing Enterprise and suggest solution to the problem. The study
employed descriptive survey study and 30 Manufacturing Enterprises were included in the study
as sample population. The data obtained were analyzed using percentage method .Based on the
result of the data analysis the following findings were obtained.
Majority of Manufacturing Enterprise in Wolaita Sodo town center to the business by
government encouragement and looking high market opportunities in the town. Initial capital of
micro and enterprises in Wolaita Sodo town is very low. Most of Manufacturing Enterprise in
Wolaita Sodo town face problem like: - Financial problem, access to market promotional
problem and computation is the major one.
5.2.CONCLUSION
Based on the major findings presented in above the following conclusion had been drawn .As
revealed from majority of the respondents that affect the growth of Manufacturing Enterprise are
:-lack of access to finance ,lack of access to market , lake of promotion and competition and
indulgences of government action and etc. So if these major problems are solved and sector has
given a high emphasis by government, NGOs and private sectors it is possible to let the sector
growth and expand at an expected rate . In order to solve, the major problem of Manufacturing
Enterprise the following suggestion are recommended.

30
5.3.RECOMMENDATIONS
The following are some of the promotional assistance that should address by government
involvement, NGOs and private sector for the Manufacturing Enterprise in Wolaita Sodo town.
 Assess to finance
Manufacturing Enterprise site the lack of finance as a greatest constrain to their growth .The
financial need of different types of Manufacturing Enterprise vary widely with access problem
particularly sever for startup enterprises .So in this regard ,the government ,privet sector and
other sector should . Encourage and create an enabling environment for establishment of more
financial institution that avail funds. Reply the policy of bank to avail credit to Manufacturing
Enterprise according to their ability and divesting range of collateral types.
 Access to market
To overcome the problem related with market the following should be recommended.
Manufacturing Enterprise product service match with the presently demanded by consumer or
market. Assisting Manufacturing Enterprise in advertising their product through mass media
such as: -Radio. TV, New paper and by using other mechanism, establishing market information
centre that would collect analysis, store and disseminate market related information on:-
 Price
 Source of input
 Existing and potential market
 Consumer need
 Access to training and promotion

31
The relevant training and promotion program made available to Manufacturing Enterprise in
Wolaita Sodo town have been very minimal so to address this problem. Information on the
available types and possibility training should be disseminating more effectively. All the
Manufacturing Enterprise given up dated training which related with their current operation. It is
more successful if Manufacturing Enterprise promote their product and services to attract
customer and get more market share through using different promotional means
 Government polices
The nature of the government policy is also another determinant factor for the success of
Manufacturing Enterprise . Despite it ,s importance ,it have so many impediments which affect
the smooth operation of the sector as it is indicated in the analysis part of this study .To
overcome these problems . The government should have to improve taxation and marking them
to pay according to their ability. The government should relax it is policy with regard to the
number of members and not limiting the number of groups they forms by their interest.

32
REFERENCES
Andualem, H(2000). Small Business Enterprises. 2nd ed. Addis Ababa: Mega
press Enterprises
Balve, V. (2003). Entrepreneurship 3rd ed, New York:United Nation University press
Bhatia, F (2003). Entrepreneurship and small Business Management
Washington: Western University Press
Cromic, H (2000). Understanding Enterprises, Entrepreneurship and Small Business.
Great Britian: wales, ebbw Value Press
Gebretensea, H. (2003). Entrepreneurship. Mekelle; central Press
Gibrehiwot, A (2005). Manufacturing Enterprise . Addis Ababa Bole Press
Hill, T (1987), Small Business production and operation 2nd ed. kriswo appa: kalopoonga Press
Kumar, R. (2011). Research Methodology: A Step –By- Step Guide for Beginner 3rd ed.
London, thousand Oaks, CA and New Delhi, Sage
Lambing, J(1987). Now to run small Business Entrepreneurship. Baltimore;Hopkins
University pres
Necholos, S(1997). Small Business Management 6th ed.oxford claredon press
Urlacher, L(1999). Small Business Entrepreneurship: Newyork: McGraw-hill press.

33
APPENDIX
QUESTIONNAIRE
These questionnaires prepared for factors that affect the productivity of business enterprise of
Wolayta Sodo Town will be submitted to the department of business management on partial
fulfillment for Bachelor degree in accounting and finance. Assure you that any information you
provide below will be kept confidently and will not use for any other purpose. You are not
required to write your name.
Direction: Circle your choice or write your answer on space provides.
Part I: Personal information about the respondent
1. Gender
A. Male
B. Female
2. Age
A. 18-35
B. 36-55
C. 56-65
D. Above 65
3. Marital Status
A. Married
B. Single
C. Divorced
D. Widowed
Part II: Main Questions
4. What makes you start business in Wolaita Sodo town?
A. Market opportunity
B. Governmental encouragement
C. Availability of raw material

34
D. Only for moral satisfaction
4. Types of Business
A. Merchandise
B. Construction
C. Urban agriculture
D. Service delivery
E. Others
5. What challenges you face while running your business in Wolaita Sodo town
A. financial problem
B. Market availability
C. Lack of infrastructure
D. Lack of access to market
E. Government action
6. Your sector gets an opportunity of training or not.
A. Yes
B. No
7. Growth level of your business
A. High
B. Moderate
C. Slow
8. There is access to the credit
A. Yes
B. No
9. Your source of credit
A. Bank
B. Small saving and credit association
C. Interested individual who give loan
10. There is access to the market
A. Yes
B. No
11. Is the competition of the Manufacturing Enterprise fair
A. Yes

35
B. No
12. There is fair promotion of the Manufacturing Enterprise
A. Yes
B. No
13. Main reason for lack of promotion
A. Lack of finance
B. Lack of skill
C. Others
14. There is support for your Manufacturing Enterprise
A. Yes
B. No
15. There is a governed action for your business
A. Yes
B. No
Thank You for your Cooperation

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