QUALITY CONTROL AS A COMPETITIVE TOOL FOR SMALL SCALE ENTERPRISES IN NIGERIA
TRADITIONAL CONCEPT OF QUALITY
There is the need to differentiate between the traditional concept of quality and the TQM concept of quality.
The traditional concept of quality makes quality a function of the attributes of the product or service, for example, a quality product/service is one that meets all the specifications laid down by the provider of the product/service. Within this conception of quality, there is the implied relationship between quality and costs (in short by implication is that the higher the quality, the higher is the cost of product/service.
Nonetheless, Robson (2000) define quality as “meeting the agreed requirements of the customer, now and in the future. Adedeji and Basiru (1989) provide the following systems – oriented definition of quality:
Quality refers to an equilibrium level of functionality possessed by a product or service based on the product’s capability and the customers need.
Quality for a product or service has two aspects (Wakhlu, 1995). The first relates to the features and attributes of the product or service. These ensure that the product meets the needs of its users. The second aspect concerns the absence of deficiencies in the product. The users of products (customers) are satisfied by a product only if it meets their expectations through these attributes.
Organisations owe their success to good service quality. Companies that differentiate on the basis of service, can ask higher prices for comparative products or services and achieve superior profit margins. These same companies are more resistant in economic down turns and experience greater growth in economic boom periods (Horovits and Panak, 2002). They also have, on average, lower advertising cost, lower sick level rates and consequently, service quality excellence, has become the most Recent ‘buzz’ phrase in management circles and the strategic objective of many major firms. Companies, who find it difficult to compete on the basis of price or technology, find service quality an attractive option.
It is an attractive option because unlike most strategies, a strategy based on excellent service quality is nearly impossible to imitate or duplicate. “Service quality converts a company from a anonymous object into a familiar face (Horovitx and Panak, 2002).
CONCEPT OF SMALL SCALE ENTERPRISES
2.3.1 Definitions of Small Scale Enterprises
There is hardly any unique, universally accepted definition of small scale enterprises because the classification of business into small or large scale is a subjective and qualitative judgment (Ekpenyoung and Nyong, 1992). Rather each country tends to define this category of enterprises based usually on the peculiar needs of public policies. Even with a country, the definition changes over time, depending on circumstances and specific objectives of institution. There are, however some common indicator in most definitions, namely, the size of capital investment (fixed asset), value of annual turnover (gross output) and number of paid employment. The popularity of the three indicators derives largely from their ease of measurement.
In Nigeria, the definition of small scale enterprises also varies from time to time and according to institutions, for instance, the Central Bank of Nigeria (CBN) monetary policy circular No22 of 1988 defined small scale enterprises (excluding general commerce) as enterprises in which total investment (including land and working capital) did not exceed N500, 000 and or the annual turnover did not exceed N5.0 million (Inang and Ukpong, 1992).
Following the persistent depreciation in the exchange rate of the naira, the annual turnover not exceeding N500,000 and for merchant bank loan, those enterprises, for purpose of commercial bank loans, as those enterprises with enterprises with capital investment not exceeding N2 million (excluding cost of land) or a maximum of N5 million. The National Economic Reconstruction Fund (NERFUND) put the ceiling for small scale maximum size of capital investment has been raised to N5.0 million and the turnover to N25.0 million since 1990. In the 1990 budget, the federal government of Nigeria defined small scale industries at N10 million. Section 376(2) of the companies and allied matters degree of 1990 defined a “small company” as one with: (Inang and Ukpong, 1992).
Annual turnover of not more than N2 million
Net assets value of not more than N1 million
For the purpose of this study, a small scale enterprises is defined as an enterprises whose total cost, excluding cost of land but including working capital is above N1 million but not exceeding N10 million. This is the new national definitions as contained in the CBN monetary and credit policy guideline for 1993 fiscal years.
The centre for industrial research and development at the Obafemi Awolowo University ile- ife, defined small scale as, those enterprises with total asset in capital equipment plant and working capital not exceeding N250,000 and employing not more than 50 full time workers, and also the Nigerian Industrial Development Bank (NIDB) defined small scale enterprises with project cost (investment and working capital) not exceeding N750,000 while it defines as medium scale, those businesses in the range of N750,000 to N3.0 million. (Obitayo, 1991)
2.3.2 Characteristics/Features of Small Scale Business
Apart from the matter of size, small business has three distinguishing characteristics:
1. Management.
2. Capital Requirement.
3. Local Operations.
1. Management: The management of small business unit is generally co-coordinated by the owner. As an owner manager, he is in a position to make his own decision. As a small operation outfit, the owner uses both an investor and employer. This gives him total freedom of action.
2. Capital Requirements: The amount of capital required is relatively small compared to units that are required by bigger firms. The capital required is supplied by one or at most by a few individuals.
3. Local Operation: For the smallest firms, the area of operation is local. The employer and employees often live in the community in which the business is located. This does not mean, however that all small firms serve only local market; some go beyond their areas of operation by seeking collects for their products or services in other parts of the country or even export.
2.3.3 Sources of Financing Small Scale Enterprises
There are four main sources of enterprises financing open to small scale enterprises in Nigeria. These are as follows:
(1) Formal financial institutions such as commercial banks, merchant bank, saving banks, insurance companies, and the development banks.
(2) Informal financial institution consisting of money lenders, landlords, credit and saving association friends and relations
(3) Personal saving and
(4) Other financing scheme – SME Apex loan scheme, National Economic Reconstruction Bank (NERFUND), Nigerian Export and Import Bank (NEXIM), etc