Professional Documents
Culture Documents
CHAPTER I
Marginal business enterprises comprise of organizations that usually provide services and
job opportunities to employees. These small and medium business enterprises are present in all the
economic sectors and play a very critical role in alleviating poverty, as a source of income and for
the reduction of unemployment (RoK, 2009). In the Municipality of Bucas Grande Island proper
application of engaging business is a vital element to socio-economic vision. This is because; other
economic contributions emerge from this sector. These are income generation through exports,
new employment opportunities, pioneering innovations, initiating and spurring competition and
As noted by Shepherd and Wiklund (2005) and OECD (2005), the economic activities in
many countries have now been moved from large to small and medium sized Enterprises SMEs,
which are known as the key source of dynamism, innovation and flexibility. SMEs constitute the
dominant form of business organization in all countries worldwide, accounting for up to 99 per
cent of the business population in most economies (OECD, 2010). However, most SMEs deal with
Additionally, the innovation may involve a risk of failure due to the investment for an uncertain
expected result. Statistical evidences showed that only one-third of the new products launched in
the market were successfully commercialized (Urban and Hauser, 1993). Hence, considerable
scholarly efforts have been made to analyze the nature of innovation management in Small and
The study conducted by Tambunan (2005) recorded that 82% of businesses failed due to
poor cash flow management skills, followed closely by starting out with too little money. Business
leadership is about taking financial responsibility, conducting sound financial planning and
research, and understanding the unique financial dynamics of one’s business. Half of the town
small businesses fail within the first three years because of cash flow problems. They either run out
of money or run out of time. Consumer debt, personal bankruptcies, and company insolvencies are
One of the most important reasons why businesses fail is due to poor management. In the
management category, 70% of businesses failed due to owners not recognizing their failings and
not seeking help, followed by insufficient relevant business experience. Not delegating properly
and hiring the wrong people were additional major contributing factors to business failure in this
Small business development in Socorro is no exception. Some of the businesses that were
started in the past decades are no longer in existence. There are also those businesses that are not
growing beyond the survival list stage. The high failure rate can be partially attributed to the lack
Kauffmann (2005), points out that small and medium enterprises in the African context are
affected by the existence of inadequate local markets, lack of regional integration, and extremely
difficult business conditions. This includes bureaucratic official procedures, weak infrastructure,
inadequate legal systems, and ineffective financial systems and unattractive regimes. Smaller
enterprises do not usually appreciate the core of financial management and hence have poor
understanding of the essence of good financial management (Ngugi et al, 2012). Furthermore the
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proximity of the marginal business to the urban center and the magnitude of the business is
negatively correlated to awareness of financial management. That is, the lesser the magnitude of
the business and the more distant a business is from the city center the less aware the organization
is about the financial management instruments. These situations expose the business negatively, to
external shocks to their sales and operational costs and thus limit their growth and expansion.
In small firms, current asset management is important to their liquidity and profitability.
Current assets involve the investment in cash, accounts receivable and inventory which are non-
interest bearing assets. It’s possible for a firm to avoid purchasing capital assets like land, but it’s
impossible for a business to run without the provision of adequate current assets. Current asset
management has gained increased prominence as firms began to be aware of the difference
between profitability and liquidity. This is particularly true as the major role of the financial
manager of a marginal business is to spend a great deal of their time managing current assets and
current liabilities. In addition the financial manager is involved in arranging for short term funds,
negotiating credit terms, monitoring the usage of cash, managing accounts receivable and keeping
In addition, the management of cash, accounts receivable, and inventory and the
interrelationship that exists between them may be referred to as current asset management. It
requires much of the financial managers time Eljelly (2004). It is also primarily concerned with the
issues that emerge with regards to monitoring of cash, accounts receivables and inventory. It is a
very important point in the financial management and it attempts to control cash, accounts
receivables and inventory in order to optimize profitability and improve the liquidity of the
business. It is vital to know that liquidity and profitability play a pivotal role on the life of a
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business. While a firm may continue to survive without making profits, there is absolutely no way
Mathuva (2009), posits that the lack of efficient current asset management practices by
SMEs exposes them to a lot of financial distress. This inefficiency declines the growth potential of
the business. Current asset management makes it very difficult for a firm that wants to expand to
operational plans and therefore the firm fails to meet its operational budget targets. The
inefficiency of current asset management is very detrimental to the utilization of the fixed assets
which are a fixed cost to the business. This slows down the return of investments. The
mismanagement of current assets is linked to the lack of or expensive credit facilities availed to an
organization. This situation will make the organization to lose face, as it will fail to honor its debt
obligations.
Parilla (2009), emphasized the link of management practices, entrepreneurial competencies and
business success, however, there is still a limited literature to prove on the comparison of
management practices of microbusiness owners and small business owners. It is in this context
that this study was conceptualized and it elicited information on management practices of
microbusiness and small business owners in Socorro Surigao del norte. This study benefited the
businesses owners as this provided them information on the management practices for them to
have benchmark.
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Considering the above, this study sought to find out the management practices in relation
to the causes of failures in engaging business which can help to all businessmen to achieve a
successful business. This research will be conducted as the researchers believe that this can be
Failure to understand the market, customers and their buying habit is a grave weakness in
business management (Medema, 2007). Customers need to be known as well as their reasons for
spending their money. In addition, poor market research is also detrimental to business. Choosing
an unprofitable business may render business wasteful and detrimental to itself (Hirshleifer et al.,
2005). If many activities are generated but profits are low, it may be a wasting kind of venture.
should understand and communicate what it is dealing in (Clow and Baack, 2007). It should also
define its value proposition to clients. The managers need to identify what they can do that can
help or benefit their companies. They should communicate their business offering effectively.
Furthermore, finances are necessary for business to survive. Money gets invested in order to
get rewards from it in profits. Hence, adequate finances are crucial for business success (Golin,
2001).
The study of Roy (2008), business forecasts are vital. Companies must predict the future to
be able to plan business success by offsetting future problems. If a company fails to anticipate or
react to competition, technology, or other changes in the marketplace, it may be caught off-guard.
It is risky to assume that past patterns will always work. Managers need to interrogate factors that
caused past successes. Changing times require changes in business operations. Also, competitors’
ways should be studied and counterbalanced, and new technologies should lead the business. Any
outdated methods are likely going to take the company out of business.
dies a company may perish as a result. Overdependence on a single customer (or few customers) is
a blemish because if a customer withdraws or is no longer able to continue as a client, it risks the
company’s survival. Also, if a client company fails, it risks the company failure as well.
In other hand, no company can guarantee lifelong relationship since aggressive competitors
can displace existing clients. Some company managers cannot explain their businesses. Failure to
define a proper business offering is a weakness. Also, spreading a company thin diminishes quality
since the market pays according to quality of the results (Kelemen, 2003). As stated by Reeves and
Bednar (2005), doing business right is a way to ensure business growth. Too much business can
destroy a company, thus quality, compared to quantity may be a necessary strength to elevate a
Small businesses are the backbone of many economies across the globe. The major
challenge is, however, to overcome the high failure rate among these small businesses (Olomi
2002). In South Africa, where small businesses constitute more than 80% of the business sector,
the failure rate is high (Bowler & Dawood, 2006). On average, 50% of small businesses that just
started eventually fail. This failure rate goes up to 80% in some regions (Macleod, as quoted by
According to Sheppard (2005), organizational slack tends to dry up if small business poor
management practices continue. He further asserts that firm failures can result from high
indebtedness at start-up which signals the absence of resources and the presence of high debt.
Hence, Poor management is not needed in a company. If managers do not know where the
company is going, the company will not get there. To grow and be successful, managers have to
actively work on the business. Failure to plan harms business (Sipamla, 2001).
Based on the findings of the review of related literature, some researchers have found
As cited by Hirshleifer et al. (2005) poor market research is detrimental to business. Like
without knowing that choosing an unprofitable business may render business wasteful and
detrimental to itself. If many activities are generated but profits are low, it may be a wasting kind
of venture. Other related study, (Medema, 2007) failure to understand the market, customers and
their buying habit is a grave weakness in business management. Similarity, Clow and Baack,
(2007) communication is important in managing business. A business that intends to grow should
In contrast, (Golin, 2001) finances are necessary for business to survive. Money gets
invested in order to get rewards from it in profits. Hence, adequate finances are crucial for
business success. As cited Sipamla & Gunder, (2005, 2001) poor management is not needed in a
company, lack of planning is a detriment in business management and failure to plan harms
Conceptual Framework
are likely to suffer from resource constraints and may deal with risk and uncertainty through
different forms of organizational response (Alvarez and Barney, 2005). When faced with making
decisions over future investments, such as with innovation, it is suggested that entrepreneurial
leadership will focus on a predetermined level of affordable loss or acceptable risk rather than a
price signals also forces the firm’s management to develop strategies for future
commercialization without these navigation markers (Lippman and Rumelt, 2003). Further, the
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ability of small entrepreneurial firms to exploit potential economic rents from market
opportunities has been associated with their capacity to convert tacit knowledge into explicit
knowledge and generate isolating mechanisms that allow them to secure sufficient control to
This framework links and associates the connection between the business profiles and the
communicating. The study of Sipamla (2001) stated that poor management is not needed in a
company. It can harm to a certain business that lead to bankruptcy. According to Gunder (2005),
Additionally, Larson and Gray (2011) identified other problems that may render a
company deficient as poor cash flow management, absence of performance monitoring, lack of
understanding, not using performance monitoring information, lack of financial skills and
planning, failure to innovate, poor inventory management, and failure to recognize company
strengths and weaknesses. Furthermore, trying to do everything and not seeking external help
can destroy the business. If external help is necessary, it is vital to consult. Business survival
depends on doing more of the correct things and avoiding more of the wrong ones.
The first box describes the Business Profile that comprises Capitalization, Type of
Business, Ownership Location and Number of years operated. It is necessary to know better with
the Business Profile of a certain business in order to determine its standing and succession. In
the second box, reveals the management practices wherein it leads to the failure and success of a
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certain business. And then with the connection of the two variables, in the third box it is the
Business Profile
1.1 Capitalization Management practices Business Intervention
1.2 Type of business Measure
1.3 Ownership
1.4 Location
1.5 Number of years
operated
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The aim of the study is to determine the causes of business failures in Socorro, Surigao del
Norte.
12
1.1 Capitalization
1.3 Ownership
1.4 Location
2. What are the business management practices of the selected business enterprise in terms
of:
2.2 pricing
2.3 supply
2.4 marketing
The prime purpose of this study is to provide information and to develop one’s
ability in the financial leverage practices most especially business firm and cooperative. It is
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Students. The proposed of this research can be used as the stepping stone for business
students in their specialized field of expertise. Thus, it develops the skill and credibility of every
Consumers. Through this study, the consumers become satisfied with their wants and needs
Businessmen. The result of this research study would help to business firm facilitate their
Future researchers. The study helps to enhance their capabilities and skills in making
business. It measures the capacity of each member of the group on how the tasks managed and
well done. Moreover, it provides knowledge and easy way access of gathering lessons for students.
The focus of the study is to analyze the management practices in engaging business.
Moreover, it provides information on how to assess business. Furthermore, the results would be the
aid to be able to enhance business skills of the students and this will be conducted in the
municipality of Socorro and it will focus on getting the profile of the business and its management
practices in business.
CHAPTER II
METHOD
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Research Design
The present study will employ the quantitative research approach specifically descriptive
survey type in nature. This study will determine the business profile that includes Capitalization,
Type of Business, Ownership, Location and Number of years operated and will identify the
reasons of failure in engaging business. It will seek answers to the question concerning the
purpose of the study in which to investigate the business management practices and to obtain an
aid to fix the problem in engaging business in the Municipality of Socorro. In this study,
descriptive method was used to determine the similarities and differences of the management
the study will be the total population of business owners in the municipality of Socorro, Surigao
del Norte.
Instruments
This study will use the researcher made questionnaire which will be validated by the
experts. The researcher made questionnaire will be used to determine the business profile of the
The researchers will be asked permission from the store owner to conduct the study and
approach them formally at their residence. With the owner’s consent, the researchers will
personally communicate them for the arrangement of schedule in conducting the study.
Afterwards, the researchers will administer the researcher made questionnaire to the business
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owners to gather the needed data for the research. Of course in Part I, they will use a researcher
made questionnaire to acquire the business profile of the participants and in Part II, it will be
used to identify the causes of business failure. And then, survey forms will be retrieved
immediately after collecting the data and will be tabulated and analyzed with the assistance of
statistician.
In this study, questionnaires were the main instrument to be used. The questionnaire
for the business owners consisted of two parts. Part 1 elicited business profile: capitalization,
types of business, ownership, location, and number of years operated. Part II provided the
management practices such as customer service, pricing, supply and marketing management. A
four point scale , 4-1 with answer options of “ very highly practiced” as 4, “highly practiced” as
management practices.
Data Analysis
Percentage Count and Frequency Distribution will be used to determine the Business
Profile of the participants which includes Capitalization, Type of business, Ownership, Location
Mean and standard deviation will be used to determine the management practices in
engaging business.
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REFERENCES
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APPENDECES
APPENDIX A
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LETTER OF VALIDATION
Rolando S. Nocon
Dean, College of Business
Bucas Grande Foundation College
Socorro, Surigao del Norte
Sir:
Good day!
The undersigned are fourth year BSBA students at Bucas Grande Foundation College
undertaking a research study entitled “management practices of marginal business enterprises in
Socorro, Surigao del Norte ” as partial fulfilment of the requirements in business research.
With your expertise, the researchers are sincerely asking for your precious time to validate
the questionnaire which they intend to use as the research instrument of their study.
They are looking forward for your positive response about this matter. Thank you so much
and God bless!
Respectfully yours,
MARIVIC BALBARINO
RIEZEL P. RAMIREZ
SHERJANINE TAMAYO
Researchers
Noted:
Approved:
ROLANDO S. NOCON
Dean, College of BUSINESS
APPENDIX B
LETTER OF PERMISSION
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BUSINESS OWNER
Socorro, Surigao del Norte
Greetings of Peace!
We, Marivic M. Balbarino, Reizel P. Ramirez and Sherjanine D. Tamayo, are fourth year
BSBA College student of Bucas Grande Foundation College. We are presently conducting a study
entitled “Management practices of marginal business enterprises in Socorro, Surigao del Norte ”
in the academic year 2017-2018.
In connection to this, we would like to ask permission from your good office in
administering the researcher made questionnaire and standardized test questionnaire to evaluate
your business management; rest assured that all the gathered information will be taken with utmost
consideration and confidentiality.
We’re anticipating with positive regard and approval on this earnest request.
Respectfully yours,
MARIVIC BALBARINO
RIEZEL P. RAMIREZ
SHERJANINE TAMAYO
Researchers
Noted:
Research Adviser
Approved
Business Owner
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APPENDIX C
QUESTIONAIRE
Dear Participants,
The researchers would like to inform you that you are the chosen participants of this study.
With this, we would like you to answer this questionnaire. Each of the statement in this
questionnaire evaluates and gathers information with regard to the Causes of Failure in Engaging
Business. Please do not leave any item unanswered.
Rest assured that the information you will share will be kept confidential. Please answer
honestly and with all sincerity.
Truly yours,
The Researchers
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PART- I
BUSINESS PROFILE
NAME OF BUSINESS:__________________________________________________
A. Types of business
Corporation
Cooperative
Partnership
Single Proprietorship
B. Capitalization
5,000-15,000
20,000-35,000
40,000-55,000
Above 60,000
C. Ownership
1-5 members
6-10 members
15 and above members
D. Location
Center Area
Commercial area
Not commercial area
PART- II
CAUSES OF FAILURE IN ENGAGING BUSINESS
Direction: Rate from 1-3 the following statement if you think you had performed it.
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9.
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14. Buys goods/raw materials exclusively
from particular supplier.
15. Advertises its products/services
CURRICULUM VITAE
PERSONAL PROFILE
EDUCATIONAL BACKGROUND
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College - BSBA major in Financial Management
Bucas Grande Foundation College
Socorro, Surigao del Norte
2013 - 2018
CURRICULUM VITAE
PERSONAL PROFILE
EDUCATIONAL BACKGROUND
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CURRICULUM VITAE
PERSONAL PROFILE
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EDUCATIONAL BACKGROUND