I 7 Thia Abd Proceedings Final Revised

Confident in Africa’s Future
17TH INTERNATIONAL ACADEMY OF

AFRICAN BUSINESS AND DEVELOPMENT
CONFERENCE PROCEEDINGS
GOVERNANCE AND BUSINESS POLICIES:

TOWARDS SUSTAINABLE AFRICAN BUSINESS
DEVELOPMENT
Edited by
Anita Spring
Professor Emeritus, University of Florida
Pantaleo Rwelamila
Professor, University of South Africa (UNISA)
Assisted by
Feyikemi Eyitoyosi Oniyitan
ISBN: 978-0-620-70935-4 www.iaabd.org

17TH INTERNATIONAL ACADEMY OF AFRICAN BUSINESS AND DEVELOPMENT CONFERENCE PROCEEDINGS – MAY 2016
1
FOREWORD
We look back with pride and reflect on the success of the 2015 Nairobi, Kenya Conference
with its theme: “Towards Sustainable African Business Development: Integrating Formal
and Informal Business”. IAABD has gathered on May 11 – 14, 2016 at Ngurdoto Mountain
Lodge, Usa River in the Arusha Region, Tanzania to continue to examine and re-examine many
of the issues that continue to challenge those committed to the African development agenda.
Good governance, transparent business policies, and sustainable business are the building
blocks of the forthcoming debates on how to stimulate new investments, economic growth and
sustainable development in Africa “Confident in Africa’s Future”, is the motto of the
International Academy of African Business and Development (IAABD), and it serves as a
constant.
Hence, the theme of this conference: “Good Governance and Business Policies Towards
Sustainable African Business and Development” is apt and germane particularly at this time
when the African continent is in need of innovative ideas towards economic growth,
employment creation, and sustainable progress.
The fact that this conference is taking place in Arusha, Tanzania has two additional and
significant meanings relevant to the conference theme. First, Tanzania is the birth country of
the late Julius K. Nyerere, the first president of Tanzania and one of the Pan-African pioneers,
a nationalist, charismatic thinker, and statesman. As a proponent of African unity, he was also
a founding member of the Organization of African Unity. Second, Arusha is the birth place of
the Tanganyika African National Union (TANU) Declaration, known as ‘The Arusha
Declaration’. This four-part declaration of principles included ‘the importance of self-reliance’
which is relevant to this Conference. It is imperative that the road to good governance,
appropriate business policies, and sustainable business and development should be based on
the tenets of self-reliance for every African country. An extract from ‘The Arusha Declaration’
strongly suggested that:
“The development of a country is brought about by people, not by money. Money,

and the wealth it represents, is the result and not the basis of development.”
The spirit of ‘The Arusha Declaration’ which is centered on people, should form the
backbone of good governance in Africa. There are strong indications to suggest that
continued prosperity of a significant number of nations, communities, and individuals are
closely linked with people’s ability to create, strengthen and maintain profitable,
competitive and sustainable enterprises. Such modern enterprises require organization of
basic resources (capital, material, and human) concentrated in large aggregations that give
men and women entrusted to run those enterprises power over people and resources, so
that their decisions may impact upon the society and community that can shape the future
of nations.
To achieve their objectives and effectively discharge their responsibilities, African

businesses need quality and effective leadership which is responsive, transparent and
accountable. Leaders need to have the intelligence to acquire and apply knowledge and
know-how for the production and creation of wealth. Good corporate governance should
thus be the lifeblood of African prosperity.
2
In targeting leaders, corporate governance focuses on their competitive performance and
the importance of their abiding by the highest standards of fiduciary management in order
to assure wealth creation and long-term sustainability. Consequently, corporate
governance in Africa should seek to promote:
Leadership for efficiency and effectiveness to ensure efficient use of entrusted

resources and competitiveness in the liberalized global market;
Leadership for probity that has high integrity to command respect and credibility,
and can be relied upon to use resources efficiently and effectively;
Leadership with responsibility to the various stakeholders and which is responsive
to the needs of stakeholders and the community;
Leadership that is transparent and accountable that has nothing to hide, and
which exercises power transparently; and
Leadership that utilizes intelligence and know-how in sustainable
businesses and development.
st
If African countries are to rise to the challenge and claim the 21 Century and beyond,
there is an urgent need to build capacity to step up these efforts and coordinate the
relevant initiatives, donor assistance, and corporate governance programmes to ensure a
common approach and efficient use of resources.
Parallel with good governance initiatives, sustainable business development policies and
objectives need greater development. Senior management is responsible for formulating
such policy, and for establishing specific business objectives. Sustainable development
means more than just ‘the environment’. It has social elements as well, such as the alleviation
of poverty and distributional equity.
It also takes into account economic considerations that may be absent from a strictly
‘environmental’ viewpoint. In particular, it emphasizes maintaining or enhancing the
world’s capital endowment, and highlights limits to society’s ability to substitute human-
made capital for natural capital. A policy on environmental responsibility is a good first step
towards the broader concerns of sustainable development.
Management should incorporate stakeholder expectations into a broad business policy

statement that sets out the organization’s mission with respect to sustainable development.
This policy statement would guide the planning process and put forward values towards
which management, employees and other groups such as suppliers are expected to strive.
Drafting an inspirational policy statement that is capable of influencing behavior is a
challenging task.
Many papers published in these Proceedings directly or indirectly address salient issues
towards Sustainable African Business and Development.
Papers presented in Volume 17 Proceedings of the IAABD are peered reviewed. The papers
were meticulously and diligently selected and blind peer reviewed by the Track Chairs and
other experts to underscore the relevance and essence of the conference theme. These papers
touch on various aspects of Sustainable African Business and Development. While some
papers focus on specific issues in different countries in Africa, others deal with issues that
affect the continent as a whole. Some papers examine the impact of specific global
3
phenomena/issues or processes on Africa. The diversity of the papers in this volume also
reflects the academic versatility and multidisciplinary background of the contributors. While
the reviewers painstakingly did their work, the authors are responsible for the views and
conclusions expressed in this volume.
Once again it is a great honour and privilege to serve IAABD as Joint Proceeding Editors. We
owe great gratitude to several individuals who have in various ways contributed and are
contributing to the success of this conference and to the publication of this volume. We are
grateful to all the authors who submitted their papers and whose papers are contained in this
volume. We are particularly thankful to the track chairs for undergoing the painstaking and
tedious management of review process of all the papers and sharing their thoughts with the
various authors.
We also wish to thank the host, Nelson Mandela African Institute of Science and Technology
(NM-AIST), Arusha, Tanzania and the Local Organizing committee for their tireless efforts in
making this conference a success. A special mention goes to Dr. Liliane Pasape and Mr Gadi
Mbuya for navigating the conference ‘ship’ with precision.
Finally, we are humbly thankful to Kofi Dadzie, the President of IAABD, for entrusting us
with this important opportunity to serve. And to all the members of the current IAABD
Executive Committee and Board of Governors, we appreciate the opportunity to serve in our
present capacities and for your unflinching support.
Pantaleo M. D. Rwelamila, PhD Anita Spring, PhD

Co-Editor Co-Editor
Professor of Project Management & Project Professor Emeritus of Anthropology and
Procurement Systems African Studies
Graduate School of Business Leadership (SBL) University of Florida
University of South Africa (UNISA), South Africa Gainesville, Florida, USA
IAABD Board of Governors
4
SCIENTIFIC COMMITTEE
NAME AFFILIATION
Purdue University Calumet
Pat Obi
Athabasca University
Jacob Musila
Washburn University
Norma Juma
Brunel University
Frederick Mmieh
University of Houston
Femi Ayadi
University of North Carolina
Moses Acquaah
Nottingham University
Judy Muthuri
University of Gavle
Aihie Osarenkhoe
Pantaleo Rwelamila University of South Africa
Simon Sigue Athabasca University
Kofi Dadzie Georgia State University
Zelealem Yiheyis Clark Atlanta University
LIST OF REVIEWERS
NAME AFFILIATION
Shomir Sil Purdue University Northwest, USA
Raida Abuizam Purdue University Northwest, USA
Paolo Miranda Purdue University Northwest, USA
Emmanuel Cleeve Manchester Metropolitan University
Eileen Kwesiga Bryant University
Jennifer M. Sequeira The University of Southern Mississippi,

USA
Frederick Mmieh Brunel University
James Baba Abugre University of Ghana Business School, Ghana
5
Moses Acquaah University of North Carolina at Greensboro,
USA
Akentoolove Corbin University of the West Indies, Cave Hill,
Barbados
Stephen James Institute of Rural Development Planning,
Tanzania
Emmanuel M. Tonya Open University of Tanzania, Tanzania
Richard A Owusu Linnaeus University, Kalmar, Sweden
Benny Berggren University of Gävle, Sweden

Gertrude Opira Council of Baltic Sea States, Sweden
Michelle Rydbäck University of Gävle, Sweden
Desalegn Abraha University of Skövde, Sweden

Jan-Erik Jaensson Open University of Tanzania
Hawa Uiso Open University of Tanzania
Albertina Jere Cape Peninsula University of Technology,

South Africa
Neha Purushottam University of South Africa, South Africa
Ayantunji Gbadamosi University of East London, UK
Guiomar Martín-Herrán Universidad De Valladolid, Spain
Maxwell Ofori Nkrumah Tbwa\Markcom, Accra, Ghana
Cynthia A. Bulley Central University College, Accra,Ghana
Henry N. Ozuru University of Port Harcourt, Nigeria
Thérèse Roux Tshwane University of Technology, South

Africa,
Italo Trevisan Italo Trevisan, Università Di Trento, Italy
Mahama Braimah University of Ghana Business School, Accra

Ghana
Gabriel Malima Nelson Mandela African Institution of
Science And Technology, Tanzania
Mabel Birungi Komunda Makerere University Business School,
Kampala Uganda
Hawa Uiso Open University of Tanzania
6
Ozias Ncube University of South Africa
Bukaza Chachage Nelson Mandela African Institution of

Science And Technology, Tanzania
Professor Alfred Ngowi Central University of Technology, South
Africa
Ozias Ncube University of South Africa
Binganidzo Muchara University of South Africa
Jan Kruger University of South Africa
Hector Iweka Lasell College, USA
Chimba Deo Tennessee State University, USA
Simon Sigue Athabasca University, Canada
EXECUTIVE COMMITTEE
President Kofi Q. Dadzie Georgia State University, Atlanta, GA
Vice President Simon P. Sigué Athabasca University, Canada
Tidings P. Manchester Metropolitan University

Executive Secretary
Ndhlovu Business School, UK
Vice president Finance O. Felix Ayadi Texas Southern University, USA

& Treasurer
Vice President Moses Acquaah University of North Carolina at

Membership Greensboro, USA
Vice President Judy Muthuri Nottingham University, UK

Communications
Program Chair Emmanuel Cleeve Manchester Metropolitan University, UK
Proceedings Co- Editor Pantaleo D. Graduate School of Business Leadership,

Rwelamila (PD) University of South Africa (UNISA)
Proceedings Co- Editor Anita Spring University of Florida, USA

7
Table of Contents
TRACK 1 -
Accounting, Finance, and Investment .......................................................................................................... 12
Agency Problem and the Adverse Effects of Accounts Receivable on Performance of Small and Medium
Enterprises in Tanzania .......................................................................................................................................................... 13
Religiosity and Financial Decisions of Young Adult Nigerians: .................................................................................. 31
Is the Money Advice of Religious Leaders Sacrosanct? ................................................................................................. 31
International Aid, Economic Policies and Strategies ................................................................................... 47
The possible impact of establishing the BRICS New Development Bank for Infrastructure Development in
Africa ........................................................................................................................................................................................... 48
Occupational Health Hazards: Reducing Environmental Health Effects Of Electrical/Electronic Equipment

On At-Risk Groups In Enugu, Nigeria ................................................................................................................................ 60
Entrepreneurship, Small Business and the Informal Sector ....................................................................... 69
Indigenous Leadership From Unlikely Source: The Rewriting the Global Entrepreneurship Story by the
Maasai ......................................................................................................................................................................................... 70
Sustainable Entrepreneurship: Positive Change Agents ................................................................................................ 91
at the Base of the Pyramid (BOP) ........................................................................................................................................ 91
The Impact on Livelihoods of the Income Earned ............................................................................................................ 94
by Women Hairstylists in Tanzania...................................................................................................................................... 94
Influences on the Start-up and Growth of Small and ..................................................................................................... 121
Medium Enterprises in Tanzania ........................................................................................................................................ 121
Indirect Business Formalisation: An Inclusive Approach ............................................................................................ 141
to Regulating the Second Economy .................................................................................................................................... 141
Influence of ICT in Enhancing Business Management in the 21st Century: The use of Mobile Phones in
Business Management ........................................................................................................................................................... 155
Motives, Support and Constraints behind Female Entrepreneurs in Tanzania: Review of Theoretical
Literature and Proposed Conceptual Framework.......................................................................................................... 169
Charles Mbeye Limbert......................................................................................................................................................... 169
Review and Analysis of Women Entrepreneurs Challenges in the Construction Industry – the case of
Tanzania ................................................................................................................................................................................... 182
Assessing The Entrepreneurship Education And Intention: A Case Of Open University Of Tanzania ............ 198
8
Sustainable economic development and the informal economy: lessons from an emerging market
economy ....................................................................................................................................................... 211
Sustainable Economic Development and the Informal Economy: Lessons from an Emerging Market Economy.
..................................................................................................................................................................................................... 212
Economic Integration and Multilateral Trade Gains: An examination of the Implementation of the East
African Community (EAC) Common Market Protocol ................................................................................................. 219
Human Resources, Management and Organization .................................................................................. 230
Lead: Leadership Effectiveness: Egypt’s Case ............................................................................................................... 232
Transport Business Sustainability: A Review Of Succession Planning For Family Transport Business ......... 243
How Organisational Training can Influence Employee Performance and Employee Intention to Leave
Manufacturing Companies: A study of Ghana. ............................................................................................................... 257
Corporate Governance: Theories and Relationship with Organizational Performance in Developing World
..................................................................................................................................................................................................... 272
Marketing and Consumer Behavior........................................................................................................... 286
The Link between Entrepreneurial Orientation and Market Orientation, and the Research Knowledge from
Sub-Saharan Africa: .............................................................................................................................................................. 287
A Literature Review ............................................................................................................................................................... 287
Handling Customer Complaints for Loyalty in the Services Sector: Case of Mobile Telephone Companies in
Uganda...................................................................................................................................................................................... 303
Website Attributes And User Perspectives Of E-Tailing Firms In Port-Harcourt, Rivers State, Nigeria ........ 317
Influence Of Relationship Marketing On Customer Retention In Tanzania Luxury Hotels ................................. 343
Masculinity, Symbolism and Ethnic Marketing in the UK: .......................................................................................... 361
Setting a Research Agenda................................................................................................................................................... 361
The Process of Firm Establishment In International Markets: A European Telecommunications Operator in

Latin America .......................................................................................................................................................................... 376
Customising sizing system as a niche marketing concept for the small fashion enterprise targeting the full-
figured pear-shaped woman: ............................................................................................................................................... 391
A South African perspective ................................................................................................................................................. 391
The nature of category management: the case of a grocery retailer in Kenilworth Cape Town ........................ 395
Determinants of Customers Loyalty in the Hospitality Industry: A Study of Selected Hotels in Asaba, Delta
State, Nigeria ........................................................................................................................................................................... 407
Exploring the dimensions of internal marketing in small hotels ................................................................................. 424
Moving Toward Capturing Consumer Attention: A Content Analysis of Ghanaian Radio

Commercials/Advertisements .............................................................................................................................................. 443
Determinants of Customer Switching Behavior: Evidence from the.......................................................................... 464
Non-Bank Financial Institutions (NBFIs) in Ghana ...................................................................................................... 464

9
Understanding Consumers’ Behaviour Towards Online Shopping: A Study of Online Shoppers in Anambra
State, Nigeria ........................................................................................................................................................................... 477
South African Consumer Sentiment Towards Marketing.............................................................................................. 493
Factors Affecting Customer Satisfaction of the............................................................................................................... 512
Privatized Extension Services.............................................................................................................................................. 512
Operations, Logistics/Supply Chain Management, and Project Management .......................................... 525
An Analysis of Supply Chain Management Practices of Alcoholic Beverage Manufacturing Firms in Ethiopia
..................................................................................................................................................................................................... 527
An Empirical Dynamic Sensitivity Analysis Approach for Managing Development Project Operations and
Supply Chain Risks................................................................................................................................................................. 547
Factors Affecting Risk Management in IT Projects – A Case o Public Sector Organisations in South Africa566
An Analysis of Outsourcing Drivers for Maintenance Services in a Power Utility in South Africa .................. 582
Pavement Management Analysis Of Arterial Roads in the City of Chattanooga, Usa Using Micropaver ...... 595
Managing environmental collaborations at business schools by projects: Possibilities and a way forward.. 609
Graduate Student Paper .............................................................................................................................619
Factors Influencing Customers’ Intention to ‘Port’ Mobile Numbers in the Nigerian Mobile
Telecommunications Industry .............................................................................................................................................. 620
10
TRACK 1
11
Accounting, Finance, and
Investment
12
Agency Problem and the Adverse Effects of Accounts Receivable on
Performance of Small and Medium Enterprises in Tanzania
Evelyn M. Richard
University of Dar es Salaam Business School, Tanzania
mbwamboneema18@gmail.com
Neema Mori
University of Dar es Salaam Business School, Tanzania
Norwegian Centre for Microfinance Research, University of Agder, Norway
neema.mori@gmail.com
Abstract
SMEs play a key role in the economic growth of any economy and Tanzania in particular.
Selling on credit has always been used by most SMEs to enhance the level of sales and thus
revenue. Timely repayment by debtors has however, been established to be among the major
problems facing SMEs. This in turn causes cash flows problems, which hinder SMEs to run
their businesses smoothly. This paper assesses the effect of credit sales on the performance of
SMEs in Tanzania, from the credit risk management perspective. The study is guided by agency
theory and uses a data set of 6,134 Tanzanian SMEs that were collected by Financial Sector
Deepening Trust while conducting a national Baseline survey. Results show majority of SMEs
(54%) sale on credit. Of these, 26% default. We further observed bad debts to be associated
with high costs. The costs incurred as a result of managing debtors are those related to financing,
administration, moral hazards and agency. Our paper contributes to agency theory by showing
how relationship between the principal (SME owners) and agent (debtor) can be hampered by
ex-post asymmetric information whereby by the debtor decide to act in his/her own interests
but against the interest of the owner and that are in contravention of the terms of the contract
between the two parties.
Key Words: Debtors; Credit Sales; Performance; SMEs; Tanzania
1. Introduction
Small and Medium Enterprises (SMEs) have acquired a significant position in economic
development process in the world (Smit and Watkins, 2012). It is estimated that 1/3 of
industrial employment in first World countries like the United States of America, and the
United Kingdom are created by SMEs (Ibid). Further, in the USA, SMEs generates at least
60% of the GDP (Ovia, 2001).
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Studies conducted in developing countries indicate that SMEs have greater economic benefits
than large firms in terms of employment generation, efficiency and growth since they use more
of what a country possesses and less of what it lacks (Mbura, 2014). In Tanzania, this sector
had played a critical role in developing the economy through creation of employment
opportunities, income generation, equitable distribution of income hence contributing towards
poverty alleviation (Hamisi, 2011; Ubabuko, Kavuwo, Adjei & Shahihuzzaman, 2010). More
than 5.2 million people in Tanzania are employed by SMEs (Oyen & Gedi, 2013). As far as
income generation is concerned, SMEs play a fundamental role in utilizing and adding value
to local resources thus, facilitates distribution of economic activities within the economy and
fosters equitable income distribution (SME Policy, 2003). The sector has further contributed
27 percent to the GDP (MIT, 2012).
Despite their importance, SMEs in Tanzania do still face several challenges. Among them are;
customers taking products on credit and not paying, harassment from authorities, access to
reasonable cost finances/credits, insufficient working capital, high taxes, high cost of inputs,
lack of trusted workers, lack of proper working places, lack of access to utilities like electricity,
water and alike just to mention the few (MIT, 2012). It has been observed further, that several
SMEs survive for a short time after they are started. Most of them fail due to poor working
capital management (debtors, cash, account payable/creditors and inventory/stocks) (Kahinde,
2011). Most SMEs do not engage their working capital in such a way as to enjoy maximum
profit. Padachi and Howorth (2013) study supported other previous studies which revealed that
SMEs tend to neglect the working capital management area and is often credited as the main
reason for their poor performance.
Current assets are part of the working capital of any organization. It has been observed that
account receivables/debtors are among the most important components of current assets
(Madishetti & Kibona, 2013). According to Masoud & Mbega (2013), majority of SMEs
[56.3% of their surveyed sample] in Tanzania often sell on credit. Customers taking products
on credit (which creates debtors) and failing to pay back is among the critical problems facing
SMEs in Tanzania. Effective management of debtors facilitates the increase in size of business
activities by increasing total sales, consequently increasing recycling of funds and generating
higher profitability (Madishetti & Kibona, 2013). There is little that has been done to assess
the impact that debtors have on the performance of companies. In addition, little is still known
about how do really SMEs manage their debtors, what system and methods do they use in
screening, monitoring and collecting account receivables. This study fills this gap by assessing,
from the credit risk management perspective, the effect of credit sales on the performance of
SMEs. Specifically we ask: i) How do SMEs screen, monitor and control their debtors and ii)
to what extent do debtors affect business performance.
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Issuing credit to customers is a common act for SMEs and can be quite profitable, as it allows
customers to make larger purchases and builds goodwill (Klaras, 2014). However, SMEs that
make sales on credit reported that they experienced bad debts in 31.1% of all cases (Ibid). A
survey conducted in the UK indicated that more than 20% of firm failures were due to
irrecoverable debts or poor debtors’ management (Masoud and Mbega, 2013). SMEs suffer
financially when debtors do not pay on time or at all (Yusuf and Dansu, 2013). The
consequences of poor credit management is not only in making a business incur additional time
and resources in collecting debts but also delaying in converting its sales into cash which may
affect the business growth and stability (CIMA, 2009).
Knowing how to identify good debtors (screening), attribute a value and a priority scale, design
actions and mechanisms to minimize risks, continuously monitoring and controlling them are
essential in managing the credit risk (Verbano and Venturim, 2013). Klaras, (2013) explained
that, businesses that do not have risk management system in place will have a tougher time
recovering than those where the business owners have taken steps to manage risk prudently.
Managing credit risk from sale on credit cannot therefore be underestimated because customers
are primary important for cash generation in businesses.
Our study is grounded on the agency theory, which explains the relationship that exists between
principal and agent. The SMEs’ owners (principals) sell on credit and create debtors (agents)
in their balance sheets. The two have different diverse interests, which thus create an agency
problem. Effective management of agency problem is very crucial for SMEs to compete
effectively and efficiently in the market place. Further, be able to increase their businesses
activities through level of sales, increase profits and eventually continue to create more
employment and contribute significantly to the nation’s economy.
We use a data set of 6,134 Tanzanian SMEs that were collected by FSDT while conducting a
National Baseline Survey. The data covered various questions (URT 2012). The data was then
examined using descriptive and econometrics analyses.
Results show that 54% of sales that are done by SMEs are on credit. Implying that there are
many credit customers (debtors) than cash customers. We evidence 26% of debtors to be bad
implying that SMEs owners had to write them off. Bad debts are high risk for SMEs. The
regression results showed bad debts are positively related with operations costs. We argue that
the costs incurred here are not only administrative and financing, but also moral hazards and
agency costs that resulted from the relationship between the two parties.
The paper proceeds as follows. Section 2 presents the literature review followed by section 3,
which presents the methodology. Section 4 presents results and discussion, while section 5
concludes the paper.
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2.0 Literature Review
2.1 Theory
The Agency theory explains the relationship between principal and agent. Agency theory
(Principle-Agent theory) as advocated by (Jensen and Meckling 1976) assumes that the owners
of an organization (principals) and those that manage the organization (agents) have different
interests. Hence the owners will face a problem that managers are likely to act in their own
interests rather than the owners’ (Jensen and Meckling 1976; Fama and Jensen 1983;
Eisenhardt 1989).
The agency relationship in SMEs-customer relationship is similar to that of owners and

managers. The principal (SME’s owner) and the agent (a debtor) relationship is undetermined
by the problem of imperfect information. Imperfect information can be either ex-ante and/or
ex-post. The ex-ante asymmetric information involves a situation whereby the SMEs pick the
debtors without having sufficient information. This situation puts SMEs into what is known as
an adverse selection risk, meaning choosing a default debtor. The ex-post asymmetric
information on the other hand involves a situation where by the Agent (Debtor) takes actions
that are not Pareto-optimal. In this case the debtor may decide to act in his/her own interests
but against the interest of the Principal (SME owner) and that are in contravention of the terms
of the contract between the two parties. This situation is referred to as moral hazard.
The theory suggests that, it is difficult for the Principal to detect and punish the opportunistic
behavior of the Agent. However, the theory necessitates the importance of monitoring and
controlling debtors. The main objective of this study is to understand how SMEs screen,
monitor and control their debtors (adverse selection and moral hazard problems). We thus
argue that the said problems can be overcome by SMEs through continuously searching for
information about their debtors and monitor their activities.
2.2 Debtors Management Processes
Debtors’ management is a strategy that involves the process of designing and monitoring the
policies that govern how a company extends credit to its customer base. The idea behind
debtors’ management is to minimize the amount of bad debt that SMEs incur due to debtors’
failing to honor their commitments when falling due (Harris, 2014). Among the common goals
of debtors management is to ensure debts are collected within specified credit terms. The
process of monitoring and controlling debtors involve adherence to the credit limits, monitor
how well debtors make use of the taken credit, including making regular re-payments within
the terms and provisions associated with the credit terms, conducting an aging analysis of
16
debtors on a regular basis as well as implementing a fair but firm collection procedure (Harris,
2014).
Dun and Bradstreet1 show that majority enterprises do not perform any form of checking the
prospective debtors before granting credit. Most and specifically SMEs, would grant credit
sales without knowing well the clients. Drever and Armstron (2005) suggested different
measures that could be used to assess debtors’ capacity to service their credits. These include:
the length of time the client has been in business; bank or trade references; credit agency checks
if available. For SMEs, one could also assess by using referrals from previous clients or from
other suppliers (Mori and Charles, Forthcoming). Absence of written customer credit policy
may also highlight the poor credit management practices of SMEs and their inability to assure
adequate cash flow through efficient and effective management of debtors. It is further known
that the longer a debt remains outstanding, the greater the risk of becoming uncollectible
(Amrhein & Katz, 1998).
When issuing credit sales, enterprises need to consider trust as an important aspect. This also
brings the importance of ‘soft’ information arising from personal relationships and networking
and the length of the business relationship (Kubíčkova and Souček, 2013). Trust and good
management of debtors do not entail managing them to prevent late payment or default to pay.
It is a creation of a whole system of commercial relationships management that aim at
preventing the risk of late or default payments together with optimizing the costs and facilitate
the ability to pay own payables in time (Kubíčkova and Souček, 2013). It is known from the
literature that SMEs are in most cases undercapitalized and have limited access to external debt
and equity (Mori and Olomi, 2015). In this case debtors’ management is critical for SMEs in
order to finance daily operations. The cash conversion cycle that arise from among other things,
days sales outstanding and the payment period are associated with SME's profitability and has
a key in SMEs' financial success or failure (Aygün, 2012).
Empirical studies show that debtors’ management is a fundamental part of managing credit risk
and cash flows. White (1998b) while investigating an asymmetric information game which the
decision to default is separate from the decision to file for bankruptcy in the United States,
observed that, debtors first decide whether to default and, following default, creditors decide
whether to attempt to collect by obtaining a court order to garnish the debtor’s wages. She
observed that, debtors are of two types; type 1 are assumed to have low wealth and they always
default while type 2 are those with higher wealth and may or may not default. Creditors on one
hand always tend to receive nothing when they attempt to collect their dues from type 1 debtors
1
https://dnb.com/rms/hrms.htm; http://dnbsmallbusiness.com.au/Cash_Flow/
17
who normally in turn, they file for bankruptcy. On the other hand, if creditors attempt to collect
following default, type 2 debtors always repay in full.
White (1998b) argued that creditors are unable to identify individual debtors’ types at the time
of default. White concluded that even though U.S. bankruptcy filing rates are high, additional
households would benefit from filing for bankruptcy but do not actually file because they
default and creditors never attempt to collect. The result of this study suggest that high cost of
following up the debtors may shape the way SMEs strategize on how to monitor their debtors
and control their losses from credit sales.
Deloof (2003) used a sample of Belgian SMEs’ firms and found that firms can increase their
profitability by reducing the debtors’ collection period. He also found that less profitable firms
wait longer to pay their bills. Teruel and Solano (2007) using samples of Spanish SME firms
for the 1996-2002 period found that the firms can create value by reducing among other things,
the debtors’ collection period. The whole essence of selling on credit is to influence level of
sales positively. Proper administration of debtors therefore is crucial in ensuring that the same
are paying within the specified credit period.
Kubíčkova and Souček, (2013) studied management of debts in 120 SMEs of the Czech
Republic. The authors analyzed debtors by identifying the status of receivables management in
SME and examining the effects of unpaid debts on overall SME performance. Their results
indicate that 93% of all SMEs monitor and make a close follow-up on the status of debts that
their clients have. Monitoring takes place using one or a combination of procedures, which
were remainders, negotiation with the debtor, and limitation of further supplies. Findings
further reveal that monitoring helps in recovering the money and the funds were not paid
wherever there was weakness in the same. Results also show that non-performing debts burden
most companies and affect their profitability.
These studies show that debtors’ management is important as it affects SMEs performance.
However the studies miss the aspect of linking debtors and risk that the SMEs face. In addition,
SMEs operate in different contexts. The developing country context like Tanzania has different
institutions and legal framework that have effects on how SMEs operates. The current study is
thus set out to fill these gaps. In addition, our study links agency theory in the context of SME
owner as a principal and a debtor as an agent, something that previous studies did not address.
2.3 SMEs in Tanzania
SMEs are not only known for increasing a share of turnover in the private sector in most
economies, but many jurisdictions regard them as vital sources of innovation, growth and new
jobs (ACCA, 2013). SMEs are further recognized as a significant sector in employment
18
creation, income generation, and poverty alleviation, and as a base for industrial development
(Mashenene & Rumanyika, 2014).
In Tanzania, the SME sector includes micro, small, and medium enterprises (MSMEs) and are
defined according to number of employees or capital invested. Table 1 provides clear definition
of SMEs.
Table 1: SME definition in Tanzania
Category Employees Capital investment in machinery

(TZS)
Micro enterprise 1-4 Up to 5 mill
Small enterprise 5-49 5 mil to 200mill
Medium enterprise 50-99 200 mill to 800 mill
Large enterprise 100+ Above 800 mill
Source: SME Development Policy of the URT (2003)
Tanzania SMEs are evidenced to have high contribution to employment rates and reports show
that there are 3.1 million SMEs employing more than 5.2 million people which is more than
12% of the total national population. Also, participation of many Tanzanians enables the sector
to contribute 27% of the country’s GDP. The sector contributes to rural development and has
increased the income of many Tanzanians.
TCCIA, (2014) suggests four key characteristics that most SMEs regardless their context, have.
First these are high dependence on a limited number of people, often owners and managers are
one and the same persons. The owners of the enterprise are also the managers and this implies
that the decision making process is controlled by one person. This may have both positive and
negative implications. Positive implication is in terms of fast decision making because of less
bureaucracy to be followed. The owner-managers possess the feature of being an entrepreneur
and a leader. In this case when faced with situations that needs fast decisions, it is easier for
them to make those decisions. The negative implication is limited expertise that the owner-
managers have by having both positions. If there was a separation between the two, then the
possibility of having more expertise is higher than both positions being held by one person.
Apart from lack of expertise, the enterprise may also lack access to resources from outside
sources such as finance.
19
Second, SMEs are naturally small in size with majority having very few employees. This
relates to their definitions. However, this smallness limits some enterprises to formalize most
of their operations. Because of their size, they find it unnecessary to formalize, keep proper
records, have good management systems and so forth. Inability to do so, limit them from
accessing other resources that would have assisted their enterprises to grow.
Third, they keep simple structures in terms of management, financial and information systems.
This relates to the size of the enterprise. There are few SMEs whose owners have ambitions to
grow big, who try from the early stages, to keep proper structures including financial
management and governance structures (Mori and Charles, forthcoming).
A fourth characteristic of SMEs is their ability to maintain close relationships with customers
and business partners. SMEs are able to keep relationship through the networks that they build
and use. Gilmore et al. (2001) show that SME owner managers build their networks around
their normal interactions and activities which brings personal contact networks, social networks,
business networks and marketing networks. Through these networks, they get customers,
suppliers and all influential people that are needed for their businesses. By being members of
these networks and the need to keep them and their customers that resulted from the networks,
the owner managers find themselves sell some of their products on credit.
They sell on credit in order not only to keep the current customers but also to attract new
customers and to make their stock move thus increase sales. When SMEs sell on credit they
create debtors. What is expected after a sell on credit is for the debtor to either pay on time or
for the seller to follow up their debtors in order to collect the cash. The inability to collect cash
from debtors creates challenges in managing working capita,l and in turn, affect the enterprise
performance.
The Tanzanian SMEs are further faced with challenges in recovering their cash because of
contextual factors. There are some customers who are not faithful and they would purchase on
credit on one enterprise and before paying, disappear and creates problems during follow up
(Masoud and Mbega, 2013). The absence of a valid national identification system and proper
addresses increase the challenge of monitoring debtors. In this case, SMEs have to find creative
ways of assessing their debtors and following them up in order to recover their money and
improve their businesses’ performance.
3. Methodology
3.1 Data
20
This study uses data that were collected by the national survey on MSMEs in Tanzania. The
survey was done in order to provide a national baseline of SMEs in the country. The interviews
were done to SMEs owners who were aged 16 and above (URT 2012).
The data were collected on many variables and a total of 6,134 observations were gathered for
a response rate of 98%. The questionnaire covered 20 different topics with 192 questions
focusing on the entrepreneurs’ profile, business profile, markets, finance, management
practices, business support services, business performance and livelihood demographics (URT
2012). Questions that were related to our study were divided in two segments. First the
questions related to debtors administration and these were: i) When it comes to giving credit
what do you normally do; ii) How do your customers pay; iii) Does the business regularly
experience bad debts or late payments as a results of customers not repaying as agreed; iv)
How do you deal with the problems of non-repayment.
Questions related to performance were in terms of average monthly cash revenue and monthly
operational costs that the business had. From these questions and based on literature, we
developed a set of variables.
3.2 Variables and Model
The study uses two dependent variables. First is cash revenue measured as the average amount
of cash received per month, which is TZS257,567. A second variable is operations costs, which
includes all costs associated with goods and services. This is measured as the average amount
of costs incurred per month which is TZS184,000. Two independent variables are tested in the
regression model. Credit sales measured as a binary variable on whether the SME owners sell
their products on credit and results show that 54% of sales are on credit. A bad debt was
measured as the percentage of debtors who did not pay their debts and 26% of SMEs debtors
were bad.
We use two sets of control variables. Those that are related to the owners since these SMEs are
highly connected with the owners. We evidence the average age of owners to be 36 and only
19% of them have post-primary education.76% of owners are married. A second set of control
variables is associated with the enterprise. Results show that SMEs are 6.8 years of age, only
4% are registered and 55% are on trade (retail and whole) services. Table 2 provides
measurements and summary statistics of variables included in the regression model. The model
used is as follows:
21
Table 2: Definition of Variables in the Regression Model
Variables Definition Average
Dependent Variables
Cash Revenue The average revenue per month 257,567
Operational costs The average cost per month 184,000
Independent Variables
Credit Sales Binary = 1 if there are credit sales, 0 otherwise 54%
Bad Debts The percentage of bad debts that the enterprise has 26%
Control variables
(Owner)
Age Number of years 36 years
Education Binary = 1 if the owner has secondary and above 19%
Marital status Binary = 1 if the owner is married, 0 otherwise 76%
Control variables (SME)
Business Age Number of years since the business started 6.8 years
Registration Binary = 1 if the SME is registered by BRELA, 0 4%

otherwise
Business Sector Binary = 1 if the enterprise is on trade, 0 otherwise 55%
Source: Author
4.0 Results and Discussion

22
4.1 Owners and Enterprise Demographics
Table 3 we presents characteristics of SME owners who are found in our database. We see that
majority (67%) of owners are aged between 25 years and 45 years. This implies that the owners
are young and energetic which is a good indication of the contribution that they can make to
the sector. However, 81% have completed only primary education. This indicates that people
with low levels of education occupy the sector. Similar results are evidenced in other studies
done in Tanzania (ILO, 2015; Mori, 2014). This implies that in most cases, the level of
understanding limit the growth of their enterprises. In addition, ability to sell their products or
services on credit and the capacity to manage debtors may also be affected by the fact that they
do not know how to handle debtors. This may hamper their enterprises´ performance. The
results further show that 76% of all owners are married implying that they have spouses to
assist them in businesses (Charles and Mori, 2015).
Table 3: Characteristics of SMEs Owners in Tanzania
Age of Owners Percent
Under 25 years 11
25 to 45 67
Over 45 22
Highest Education attained
Primary School 81
Secondary School 11
Technical and University Education 8
Marital Status
Single 10
Married 76
Separated/Divorced 8
23
Widowed 6
Sources: Extracted from MIT (2012), Mori, 2014.
Table 4 part (A) presents results on the characteristics of enterprises in the database. We
evidence majority (66%) to be micro, employing only one employee while the other category
is still micro but employing up to four employees (31%). This means 97% of MSMEs in
Tanzania are micro enterprises. Other studies show similar results that the SMEs sector is
crowded by micro entrepreneurs (ILO, 2015). Similar results are seen on part B of table 4 where
95% are sole proprietors while only 2 percent are limited companies.
Part C of Table 4 further, shows that majority of the businesses (96%) are not registered by the
Business and Registration License Authority (BRELA). These three parts (A, B and C) of Table
4 are linked together, meaning that the enterprises with one employee are the ones led by sole
proprietors and are informal. These characteristics may have implication on debtors’
management. First, the entrepreneurs might not know how to assess clients before selling on
credit, and hence, credit sales may kill the business. Second, since the owner is the manager,
he/she might not get enough time to follow up debtors because of multi activities that he/she
has to do alone. In this case, the debtors may delay repaying due to lack of follow-up, and in
most cases, debtors will default and move to the competitor.
Part D of Table 4 shows 54% of the enterprises are owned and run by women. These results
are in line with previous studies (IMED, 2010; ILO, 2015). This can also have effect on
managing debtors as women are softer than men in credit follow-ups.
Part E of Table 4 indicates the nature of businesses whereby majority are doing trade. This
makes it easy for them to sell on credit.
Table 4: Characteristics of MSMEs
Number of employees Percent
1 employee 66
2 to 4 employees 31
5 or more employees 3
Legality
24
Sole proprietor 95
Limited liability company 2
Partnership 3
Registration (BRELA)
Registered 4
Not registered 96
Ownership
Male Owned 46
Female Owned 54
Business Sector
Trade 55
Service: Catering; Accommodation 31
Manufacturing 14
Sources: Extracted from MIT (2012); Mori, 2014.
4.2 Management of Debtors
Table 5 provides descriptive results on the status of screening and monitoring of debtors. Recall
Table 2 where we found that 54% of sales are on credit. This is similar to findings by Masoud
and Mbega (2013), who found credit sales to be 56.3%. Majority of SMEs (61%) provide credit
period that vary between 1 day and 30 days. This means there are special cases where customers
are given longer than one month. The trend of giving up to 30 days duration is also found in
SMEs operating in the developed world. FSB, (2011) report shows that 69% of SMEs in the
UK give up to 30 days credit and very few go beyond 90 days. The implication here is that
SMEs are able to finance debtors up to a maximum of one month. Above that, they will likely
face cash flow problems that may affect their operations and growth.
25
Delay repayments happen to 42% of all debtors and this can be a result of weak follow up done
by the owners. This might be a result of among other reasons, lack of debtors’ management
knowledge as well as insufficient time to make proper follow-up. The delay in repayments is
usually a sign of non-repayments, which in most cases results to bad debt (FSB, 2011; Klaras,
2014); in our case this is 26%. The main problem that arises with delaying payments and bad
debts is the effects on cash flow. FSB (2011) mentions four challenges that SMEs get when
they are faced with late repayments and bad debtors: i) dampening business growth; ii) leading
to additional borrowing; iii) restricting productivity; and iv) difficulties in paying staff. These
problems may make owners be demoralized which may lead to closing of their businesses.
Results also show ways that SME owners rely on in order to enable qualification to purchase
on credit. The majority (85%) mentioned that one should be trusted and known to the owner
for a long time. Few SMEs (15%) rely on just the collateral given. These highlight the means
that are used by SMEs in Tanzania to screen their customers before selling on credit.
After a credit sale, the owner is supposed to follow the customer so that they pay their
obligations; some customers delay, and sometimes the owners are forced to write them off as
bad debtors. In most cases, this causes a moral hazard, as customers may change their behavior
after having the debts. This creates agency problems between the owner (principal) and the
debtor (agent). The owners employ different mechanism as a way of reducing moral hazards
and agency problems. One of them is to stop selling to those who are late with payments or bad
debtors. Our results indicate that 33% of owners employ this mechanism. 12% of owners
continue to make follow-ups while very few (4%) report the bad debtors to authorities to help
them recover the funds.
These results imply that debtors help in increasing sales, expanding the customer base, and
increase performance. However, there are costs associated with management of debtors. When
these costs outweigh benefits (and given the size of SMEs), they may lead to poor performance
and closure of businesses.
Table 5: Debtors Management
Percent
Sale on Credit / Debtors 54
Credit Duration (30 Days or less) 61
Delay in Repayments 42
26
Bad Debtors 26
Screening Debtors
Credit sale to trusted and long term customers 85
Credit sale to customers with collateral 15
Monitoring Delaying and Bad Debtors
No additional credit sale to them 33
Continue Following-up 12
Charge interest for the Delay 2
Report them to other authorities like Police 4
4.3 Debtors and SME Performance
Table 6 provides results of ordinary least square regression when all independent variable were
regressed together. The main hypothesis tested here is a relationship between debtors and
SMEs performance. Results on model 1 show a negative effect (coefficient -0.25 with p<0.10).
This means that credit sales decrease cash sales. When customers know that they can purchase
on credit, they will not pay cash upfront. They would prefer to use the opportunity of
purchasing on credit and spend cash in other things. Sharan (2012) suggests reasons for
customers not to purchase on cash; purchasing on credit increase their liquidity and for those
who resell, it helps them sell their merchandise and repay later, and finally, the price at hands
of customers is lower because of the time value of money. These reasons lead to the relationship
between the two to be negative. In addition, our results show that bad debts are negatively
related with cash sales although the result is not significant. This indicates clearly that the more
the bad debts the poor the performance hence the likely the low level of buying goods for re-
selling hence low cash sales.
Model 2 shows both credit sales and bad debts are positively related with operational costs
(coefficient 0.81, p<0.001) and (coefficient 0.61, p<0.001). This explains costs associated with
debtors’ management. The costs that come with debtors are various. First is financing costs
that the owner has to make in order to continue operating while the money is with debtors.
27
Second are the administrative costs that comes with screening the customers, record keeping
and other related costs. The third is collection costs especially when the customers are delaying
repayments. The owner has to start making follow-ups in order to remind the customer to repay.
These costs increase when customers become bad and the owner has to write them off. This
leads to loss of the revenue and affect the relationship between the owner and the debtors. Our
findings are in line with the literature that suggest that debtors decrease firm performance and
hence may lead to closure of businesses especially the SMEs (Sharan, 2012).
Results for control variables are also important. We evidence a negative relationship between
education levels and operational costs (coefficient -0.58, p<0.05). This implies that education
helps entrepreneurs in managing costs for their businesses, which, in turn contribute, to good
performance. Married owners are positively related with cash revenue (coefficient 0.06,
p<0.10). Possible explanation here is that, spouses may assist each other in following-up
debtors thus collect amounts due. Similarly we evidence age of the enterprise to be positively
related with cash revenue (coefficient 0.12, p<0.10) implying that experience in business
matters when it comes to debtors management.
Table 6: OLS Regression for Debtors and Performance
Model 1 Model 2
Cash Revenue Operational Costs
Independent Variables
Credit Sales -0.25* 0.81***
Bad Debts -0.17 0.61*
Control variables (Owner)
Age -0.41 0.69
Education 0.016 -0.58**
Marital status 0.06* 0.05
Control variables (SME)
28
Age 0.12* -0.09
Registration 0.08 0.14
Business Sector 0.06 0.08
R2 0.12 0.37
* p< 0.10 ** p< 0.05 *** p < 0.01
5. Conclusion
The finding from this study shows that, debtors’ management is critical and important for
SMEs survival. Majority of SMEs in Tanzania rely on trust while few use collateral to screen
customers before selling on credit. They keep on following them up while monitoring them. In
controlling the debtors, few stop completely selling on credit while others charge interest for
the delayed payments. Few also report bad debtors to the police.
Debtors affect SMEs’ performance negatively. Further, the more the debtors, not only the
higher the financing and administrative costs, but also the agency costs.
Our study has theoretical as well as practical implications. It contributes to the agency theory
which indicates the importance of screening and monitoring debtors so as to avoid adverse
selection and moral hazards thus enable them pay their dues and make SMEs perform well.
Practically, the study highlights main challenges that SMEs face while managing debtors. The
high agency costs influence their decisions to sale on credit and this affect their businesses.
Bad debts put pressure on SMEs’ cash flows, thus limit their businesses’ growth. Level of
education has been seen to be important when it comes to managing debtors especially
managing the costs associated with the same. Further, businesses with long term experience
have higher chances of being able to manage their debtors thus performing well.
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Religiosity and Financial Decisions of Young Adult Nigerians:

Is the Money Advice of Religious Leaders Sacrosanct?
Jude Kenechi Onyima
Nnamdi Azikiwe University, Awka Nigeria

kcdoniel@yahoo.com 2348067798206
Abstract
This paper explores the roles of religious leaders in financial decision making of young adults,
and the extent to which adherents comply with money advice of their religious leaders.
Specifically, the study examined the nature of financial services provided by religious leaders
to their adherents, the extent to which the money advice of religious leaders is appropriated,
and the relationship between financial habits of the religious leaders and that of their adherents.
The study is relevant because it will contribute to what, how and who shapes financial decision
of young adults as well as the roles of religious leaders in diffusion of financial innovations.
The area of study was Anambra State, Nigeria and 15 congregations from catholic, Protestants,
prayer houses and African traditional religion together with their adherents were randomly
selected. Findings revealed that religious leaders play significant financial roles. The money
31
advice of the religious leaders is sacrosanct as adherents prefer the advice to rationality and
execute it to the letter. There is also a strong relationship between the financial habits of leaders
and their adherents. It was recommended that religious leaders and financial service providers
should understand this new reality and become cautious of what they say and do.
Introduction
There seemed to be a consensus among researchers and behavioral scientists that cultural and
religious norms as well as the environment in which people are raised help to shape personal
traits and preferences. In recent times, due to rise in extremism, literature has identified religion
as one of the major determinants of individual person character. Prior research has extensively
examined the influence of religion on personal behavior and on firm behavior (Lehrer, 2004;
Iannaccone, 1998; Baxamusa and Jalal, 2010; Grullon, Kanatas and Weston, 2010;
McGuire,Omer and Sharp, 2010; Hilary and Hui, 2009). However, the extent to which
religiosity is associated with personal financial behavior is still less understood. Religion haa
been shown to have important influence on human behavior such as marriage, drug use and
alcohol consumption (Cialdini and Goldstein, 2004; Sunstein, 1996). Since Max Weber, the
notion that religion plays a central role in economic development and decision making has been
established. Religion is seen as creating moral codes that define choices, attitudes and
preferences. For example, Hilary and Hui (2009) find that firms located in counties with higher
levels of religiosity display lower degrees of risk exposure and lower investment rates.
Baxamusa and Jalal (2010) showed that capital structure decisions are impacted differently
depending whether a firm is located in a county with a Catholic or a Protestant majority.
McGuire et al. (2010) showed that religiosity reduces financial reporting irregularities and
abnormal accruals and increases real earnings management. From the foregoing, one can
adduce that religion is a key social mechanism for influencing beliefs and behaviors. Religion
in this context is seen as the sum total of beliefs and values that religious groups transmit fairly
unchanged from generation to generation. Rules and norms of behaviour are fundamental
elements of religion. Every single religion contains a system of ideas and rules about how life
should be lived. The rules are not restricted to the family (or the individual) but cover also the
social dimension, that is, how to behave in the community. These social norms prevent
individuals from misconduct within the society in order to restrain anti-social behavior. The
basic principle of religions is that God observes what humans do. It follows that individuals
believe that they are constantly monitored by Him, who has the power to punish those who
deviate from the norm, and reward those who follow the rules ( Johnson and Krueger, 2004;
Norenzayan and Shariff,2008). Punishment and reward are expected in both the current life
and the afterlife. Religious leaders play significant roles in inculcating religious disciplines into
people. They are seen as earthly symbols of God and are highly respected among their
adherents. They teach, instruct, exhort, correct, advice and protect their congregation. The play
32
parental roles to their congregation and in most cases assist members in making decisions.
Accordingly, religiosity has proved to exert a huge effect on individual decision making and
behaviour. Literature shows that religiosity affect economic variable such as educational
attainment, income, investment decisions, labour force participation, marriage and donation
(Keister, 2003, Neuman, 2007; Branas- Garza et.al., 20).
A number of people who have questions about managing their money are looking for answers
in a place that might surprise some – the church. A survey by Thrivent Financial (2015)
observed that Thirty-eight percent of young adults have turned to a faith community, religious
leader, or faith-based financial education program for money advice. The survey revealed that
people of all ages who have mixed finances and religion were more likely to have a long-term
financial plan than those who hadn’t turned to a faith community for advice.
The importance of faith communities in helping people to manage their finances is becoming
popular. Even many people who are not religious are increasingly turning to faith communities
for wisdom and knowledge of how to manage money. The prevalence of young adults in use
of faith-–based associations in making financial decisions has attracted the attention of many
researchers. Especially among Christians, young people are more likely to look onto their
religious leaders or church community for help. The number of young people turning to religion
for advice and help is on the increase. This could be because of their unique financial needs.
They are more flexible to innovations and knowledge and as a result, they tend to exhibit habits
markedly different from other people. The financial habits of this population is malleable and
interesting because they just started earning money, just started family, just started investing,
willing to experiment with new ideas and lack experience in handling money. A number of
faith-based associations now offer financial services. Apart from establishing microfinance
institutions, many faith-based groups provide teachings and counseling on money lessons.
People look up to religious leaders for financial guidance and assistance. “People are turning
to the church for help, whether it’s help making their mortgage payment, putting in a prayer
request, assistance in finding a job or just getting practical, day-to-day strategies for managing
debt,” personal finance expert Lynettee Khalfani-Cox told CNN in 2009. This is true especially
among people who could not afford paying financial planners or those who trust faith more
than rationality. There is increase awareness among young adults on making sure that their
financial and personal choices fit with their personal values. This arguable could be the reason
for turning to religion for guidance on money matters. “If I’m a religious person, and my values
are what my religion teaches, I need to ask if my financial goals are in line with those values”
(Waldman, 2015).
In Nigeria, the second most religious country in the world, religion plays significant role in
career choice, family life, political leaning and economic activities. Religious leaders owing to
their symbolic positions influence adherents’ socio-economic habits. Young adults constitute
33
over 40% of the Nigerian population and possess peculiar characteristics. The focus of this
study therefore is to investigate the extent to which young adults give prominence to faith than
rationality in making financial decisions as well as the roles religious leaders play in financial
decision making. Specifically, I intend to determine the nature of financial services provided
by religious leaders to their adherents, the extent to which the money advice of religious leaders
is appropriated, and the relationship between financial habits of the religious leaders and that
of their adherents.
Review of Literature
Effect of Religion on Financial Behaviour
Religion is considered an important variable influencing people’s decision. McCleary and

Barro (2006) claim that successful explanations of economic performance must go beyond
narrow measures of economic variables to encompass social and religious forces. Economic
literature contains a rich body of studies that examines the link between religion and economic
variables (Guiso, Sapienza, and Zingales 2006; McCleary and Barro 2006). The seminal study
of Weber (1905) spurred a large body of literature on the impact of religion on both
macroeconomic aggregates and firm-level indicators. Weber contends that religion has a
positive impact on economic growth. He concludes that Protestantism, not Catholicism, has a
great impact on economic growth because of the Protestant work ethic. McCleary and Barro
(2006) emphasized how religion matters to economic and other outcomes. From a religious
perspective, some motivators influence human behaviors such as salvation and damnation.
These compensators spur individuals to behave in a given manner to promote growth. Kennedy
and Lawton (1998) assert that an individual’s religiosity exerts a substantial influence on the
choices of corporate managers. Religion influences the entrepreneurial psychological state and
the motivation to start a new business (Papageorgiou 2012). Guiso et al. (2006) use an empirical
design and observed that religious beliefs positively affect income and income growth. They
also showed that the Christian religion is typically more positively correlated with economic
growth than others. Religion is also a determinant at the firm’s level of the interplay between
financial and investing decisions. McCleary and Barro (2006) show that economic
development and government institutions influence religiosity. They also find that religious
beliefs and participation in rituals affect economic growth. These two main results mean that
religiosity is simultaneously a dependent and independent variable, which is their baseline
focus. Guo (2004) provides empirical evidence that religious dissimilarity plays an important
role in delaying foreign trade and as a strong barrier impeding the trade between the United
States and China. As Helble (2007) shows, a common religion may increase the FDI but the
presence of different religions en-genders severe competition and triggers favorable growth
because a liberal society in which the religion is diversified attracts foreign investors. Several
authors such as Iqbal and Mirakhor (2011) and Schoon and Nuri (2012) claim that religion
34
interferes with the design of the financial instruments that firms trade with their residual and
non-residual claimants. For instance, the three monotheistic religions—Judaism, Christianity,
and Islam—together with Buddhism and Hinduism, forbid the use of interest. Furthermore,
religion spurs individuals who claim to be religious to behave differently from those who do
not. Porter and Steen (2003) claim that 79 percent of American investors describe themselves
as religious or spiritual and 62 percent of them keep in mind their faith when they make
financial and investing decisions. The nonreligious and agnostic investors amount to about 33
percent and use personal values in their decisions. Religion also affects personal financial
choices. For example, Renneboog and Spaenjers (2012) surveyed a sample of Dutch
households to study the differences between religious and nonreligious households in terms of
financial decisions. The authors show that religious households consider themselves as more
trusting, have a longer planning horizon, and have a higher propensity to save. There are also
studies that show the effect of aggregate country-level religiosity on country-level economic
performance. For instance, Barro and McCleary (2003) observed that religious beliefs (at the
country level) may stimulate economic growth.
There are several experimental studies that investigate the role of religious denomination and
intensity of religiosity on social behavior using economic games. Yet the results vary and are
not conclusive. For instance, Anderson and Mellor (2009) investigated whether religious
denomination and intensity of attendance of church services correlated with cooperation. They
are used a repeated public goods experiment, and find that neither denomination nor church-
attendance significantly affect contributions to the public good. The experiment was replicated
using a sample of 144 students, yielding similar insignificant effects. Anderson et al. (2010),
on the other hand, find that contributions increase with frequency of church attendance, among
subjects attending religious services. In the same paper, Anderson et al. also find that church
attendance does not have a significant effect on the outcomes of a trust game. Using a large
sample from three European countries, Migheli (2012) does however find a weak positive
effect of religiosity, measured by time devoted to religious associations, on the amounts passed
by the senders to the receivers in a trust game. In a similar vein, Eckel and Grossman (2003)
report a positive correlation between attendance at religious services and donations to charities,
in an experiment with 168 subjects. Ahmed (2009), using a sample of 102 men, finds that
religious students are more cooperative in a public good game and give more in a dictator game
than non-religious ones. Benjamin et al. (2010) explore the impact of religious identity on
contributions in a public good game; giving in a dictator game; risk aversion, time discounting
and behaviour in a labour market task. Results are unclear: after religious priming, Protestants
contribute more to the “public good”, Catholics contribute less and become less risk averse,
while Jews reciprocate more in the labour market game. Also, they find no evidence that
“religious identity salience” affects discount rates or purely altruistic generosity in the dictator
game. Rand and et al. (2013), based on two experiments with 69 and 547 subjects, analyzed
35
the effect of explicit religious primes on subjects’ behaviour, in a Prisoner’s Dilemma Game.
They suggest a positive effect of religious primes on cooperation, at least among Christians.
There is no doubt that substantial relationship exist between coping with financial stress and
religiosity. Various reasons have been posited on the importance of religious belief and
spirituality in counseling theory and psychotherapy practices. It was noted that many people
facing financial problem would turn to religion in coping with their financial stress. Kelly
(1995) stated that many mental health workers believed that seeking a spiritual understanding
of one‟s place in the universe is important in overall health and well-being. This idea is
supported by Hasan Langgulung (1991) where he opined that a counseling process will be more
effective when it takes into account cultural and religious values of a client. Western scholars
also agreed on the influence of religion and spiritual belief in counseling process. Studies has
been made by Quackenbos et al. (1985) which stated that 79% clients found that religious value
is the main topic of discussion during counseling process. Psychologists and counselors need
to look at religion as a tool to enhance happiness especially in designing intervention.
Young Adults, Religiosity and Financial Decisions
Why do young people seek financial advice from religion? A number of authors have struggled
to explain the linkage between religiosity and financial decisions. A recent economic
perspective holds that cultural and religious norms as well as the environment in which people
are raised help to shape personal traits and preferences. Behavioral scientists contend that
human psychology and emotions influence investment choices. However, only few authors
have studied the role that religion plays in determining financial decisions and preferences.
Young adults present a peculiar context. This is because of their age, education, personal traits,
occupation and level of cooperation with other segments of the population. For instance, Heelas
and Woodhead (2005) find that older individuals have a high tendency to attend church, than
young people which means older people are more religious. Fehr et al. (2003) report that retired
individuals above the age of 65 tend to be more trustworthy than those inder 35 years of age.
Thus, as individuals get older, their degree of religiosity increases. Guiso et al. (2006) find that
individuals who receive a religious education express a higher level of trust and trust religious
institutions more. According to Iannaccone (1998), individuals with a higher educational level
exhibit a lower degree of religiosity. Similarly, Fehr et al. (2003) find that highly educated
individuals express lower social behavior such as trust behavior. Young adults owing to lack
of experience in financial matters look for trust. Religiosity is the most important driver of
personal trust (Altman, 2012). Both economists and sociologists agree that religiosity promotes
trust among individuals (Arrunada 2010). Paciotti et al. (2011) find that religious individuals
exhibit a higher trust level compared to nonreligious people. The authors add that both religious
and agnostic individuals trust religious people. Johansson-Stenman, Mahmud, and Martinsson
(2009) examined whether religious differences affect trust among Hindus and Muslims in rural
36
Bangladesh. The result suggests that trust appears to be stable across religions. The main trend
of research suggests that religious individuals are more likely than secular ones to behave
cooperatively. As Sosis and Ruffe (2003) note, participation in collective religious prayers and
rituals triggers a higher degree of cooperation. O’Rourke’s (2002) study shows that Danish
Protestant farmers exhibit more cooperative behavior than Irish Catholic farmers. Based on
cooperative game, Paciotti et al. (2011) find that religious individuals (compared to agnostic
ones) are more cooperative and more generous, and often communicate information about the
rules on game playing and share their private information with other groups of players. This
could be why it was easier for young people to open up to religious leaders for guidance on
financial matters.
Social norms theory provided the theoretical framework for this study. The theory asserts that
individuals act in accordance with social norms of their peers (Kohlberg 1984). Individuals
choose to work and live in the region where the local culture and religious beliefs are most
suitable for them (Cialdini and Goldstein, 2004). Individual beliefs tend to be aligned with the
average collective local culture and religion trends (Schneider 1987). The deviation from
common social and religious norms brings on a cognitive and emotional discomfort bias
(Sunstein 1996). Such an influence can occur through social networks based on neighbors’
conversation, observation of actions, sport activity, verbal communication, commentators, and
media as well as on religious practices (Benhabib et al. 2011). This social interaction conveys
psychological, emotional, and religious beliefs among individuals that may bring forth a
psychological phenomenon observed in financial decision making. Such a phenomenon is
labeled a “meme.” Distin (2005) defines a meme as a mental representation such as “thought
to be socially transmissible beliefs, desires, values, and mental representations of tunes, stories,
myths, rituals, ways of doing things.”
Norenzayan and Shariff (2008) suggest that religion, as a cultural by-product, induces in human
psychology a high sensitivity toward the prosocial reputation within the community group.
That is, individuals who venerate moral deities exhibit a high concern for their prosocial
reputation. They try to adapt to the business practices that could satisfy their religious tenets.
Nofsinger (2005) recognizes the influence of social mood on financial decision makers. He
contends that a high social mood triggers psychological pitfalls (e.g., overconfidence and
optimism) that induce an abnormal increase in stock prices and disturb the investing decision.
Nofsinger compares the increase in social mood to emotions such as optimism, happiness, and
hope. Individuals with high levels of religious affiliation tend to be friendlier, happier,
cooperative, and more satisfied in their lives than the others. Hence, they tend to exhibit a high
social mood. Thus, social mood may find its root in religious values.
Methodology
37
The area of study is Anambra State, Nigeria and 15 popular religious leaders from catholic,
Protestants, prayer houses and African traditional religion (ATR) together with their adherents
were studied. 15 young adults were randomly selected from the 10 different congregations.
Questionnaire and interview methods were used to elicit information from the 150 respondents
and their religious leaders. Data on the nature of money advice adherents seek, as well as other
financial services rendered by religious leaders were generated. Mean score of 4point scale was
used to classify respondents agreement/disagreement to the issues raised. Decision rule was to
classify any item with mean above 3 as significant while mean values less than 3 was
considered insignificant. Pearson’s product moment coefficient of correlation was employed
to ascertain the relationship between the financial habits of religious leaders and that of their
adherents. Variables to be studied include savings habit, attitude to risk, attitude to borrowing
and income diversification. Savings habit was measured by the percentage of monthly income
saved. Attitude to risk was measured by whether the respondent was open to risk, indifferent
or risk averse. Attitude to borrowing was measured by the willingness and ability to access
loan (very high, high, medium, low, and very low). Financial Literacy is measured by the
number of hours spent monthly on reading or learning financial materials. Income
diversification is measured by the number of active income streams the respondents possess.
Data Presentation
Thirty-two percent of the respondents were Catholics, thirty-four percent were Protestants,
twenty-four percent were from prayer houses/Aladura churches, while ten percent were from
African Traditional Religion (ATR). The majority of the respondents were between 25-35 years
old (82%) while twelve and six percent were for respondents less than 25year-old and more
than 35 year-old respectively. The respondents were literate, forty-seven percent possess a
degree/diploma, 15% had postgraduate qualification while 38% attempted secondary education.
All the respondents were economically engaged. Twenty-eight percent works in public
establishments, 33% works in private establishment while 39% were self-employed.
Additionally, 74% were married while 26% were single. These respondents provided the data
that were analyzed in the proceeding tables.
Table 1. Responses on the nature of financial services rendered by religious leaders
ITEMS Always Sometimes Rarely Never Mean Remark
Pray over capital 88 40 22 0 3.44 Very

significant
Loan structuring 33 77 32 8 2.90 Significant
Debt recovery 23 57 66 4 2.66 Significant
38
Safe-keeping of 12 60 56 22 2.41 Not significant
valuables
Provision of 59 63 20 8 3.15 Very
guarantee services significant
Lending services 25 74 40 11 2.75 Significant
Saving of money 19 40 60 31 2.3 Not significant
Investingn 29 33 68 20 2.47 Not significant

decisions
Managing family 19 34 80 17 2.37 Not significant
finance
Managing 52 73 20 5 3.15 Very
business finance significant
Risk assessment 56 62 26 6 3.12 Very
significant
Asset valuation 2 39 89 20 2.15 Not significant
Business advisory 66 69 12 3 3.32 Very

services significant
I prefer their 38 82 25 5 3.02 Very
advice to my significant
rational thinking
I execute their 53 72 22 3 3.17 Very
advice without significant
adjustment
I regret following 0 9 57 84 1.5 Not significant
my instinct
instead of their
advice
Source: Field survey, 2016
Table 1 showed that religious leaders play very significant roles in blessing business capital,
provision of guarantee services, managing business finance, risk assessment and in giving
business advisory services. They also assist in loan structuring, debt recovery and lending
services. However, findings revealed that religious leaders do not play significant role in safe
keeping of valuables, saving money, managing family finance, making investing decisions and
in asset valuation.
Ninety per cent of the respondents agreed that they prefer the money advice of religious leaders
to rational thinking. They also agreed that they execute the money advice of their religious
leaders without adjustment. Surprisingly, 93 percent affirmed that they have not regretted
trusting the money advice of their religious leaders. This finding suggests that the money advice
39
of religious leaders is sacrosanct and that religious leaders play significant role in shaping the
financial decisions of young adults.
Table 2. Correlation between financial habits of religious leaders and their adherents
Variables Pearson’s Correlation Sig.

coefficient
Savings habit 0.381 0.942
Attitude to risk 0.684 0.043
Attitude to borrowing -0.401 0.068
Financial Literacy 0.728 0.023
Income diversification 0.862 0.017
Source: Field survey, 2016
Table 2 revealed that there is correlation between the financial habits of religious leaders and
that of their adherents. The correlation coefficient of three variables: attitude to risk, financial
literacy and diversification of income were strong, positive and significant at five percent level
of significance (r = 0.68; r = 0.73; r = 0.86, p > 0.05). However the correlation between the
savings habit and attitude to borrowing were weak and insignificant (r = 0.381, -0.401, p <
0.05).
Discussion of Result
Religion has assumed a significant position in determining people’s behavior, preferences and
dispositions. In communities with larger religious population, religious leaders play crucial
roles even outside the spheres of religion. Literature has established significant relationship
between religiosity and economic decisions of individuals and firms (Hillary and Hui, 2009).
The influence of religious leaders extends to socio-economic spheres such as marriage, career,
divorce, type of business venture, reporting standard, investment, child upbringing, hobbies
and even home/business location. Adherents visit religious leaders for counseling, direction,
instruction, prayers and material assistance. There is increasing trend among adherent to shy
away from decision making and push the responsibility to their religious leaders. As a result, a
number of religious leaders not only provide adherents with insights but also make decisions
for them. Some of the religious leaders owing to the strength of their insights have won
adherents’ respect and as a result, adherents struggle to conform to their habits even more than
the tenets of their religion.
Literatures (Sosi and Ruffe, 2002; Arrunada, 2010) identified two major reasons for the
growing influence of religious leaders on adherents’ financial lives. The first is the high
propensity among adherents to ensure that their financial values conform to the values of their
religion. The second is the issue of trust. Financial decision making demands trust. People
40
especially young people are finding it difficult to identify people they can trust with issues of
money. Prevalence of fraudsters and opportunists has limited peoples’ chances of getting
financial assistance and counsel. This has pushed large number of people especially young
adults to seek money advice from religious leaders. Post-hoc analysis of the data generated
showed that protestant and prayer house congregations patronize their religious leaders more
than Catholics and ATR when it comes to financial decisions. It also revealed that they exhibit
stronger correlation with their leaders in terms of financial habits.
“He is my spiritual father” a 32 year old entrepreneur answered “I cannot start any venture
without seeking his consent. He assists me in making major life decisions. I failed twice
because of disobedience; I cannot afford to do it my own way again…”
A 28 year old mother of two children commented “He gave me the debt-capital I used to start
my first business. He was also the one who negotiated loan for my step brother and advised
him not to borrow again from the market cooperative. He is like our family guardian that always
prays and counsels us before we embark on any new venture…”
“I do not discuss my family financial issues with people but for my business finance, my pastor
knows every step. He has helped me to recover four year old debt and has served as surety for
the loan I took last year…” a 36 year old public servant replied.
The implication of this finding is that it has contributed to the understanding of who, what and
how young adults make financial decisions. It has enriched the literature on financial behavior
such as why people borrow or invest in a particular source, why some financial products do not
gain acceptance, why people adopt some financial behavior as well as how people form
opinions about financial service providers and their products. If adherents depend largely on
religious leaders to make financial decisions, it means that uptake, acceptance and loyalty to
financial products depend on them. Since adherents derived their knowledge from what the
religious leaders think, say and do about financial services, their behavior should be of utmost
concern to financial service providers and policy makers. They have proved to be pivotal agent
for diffusion of innovations and in achieving acceptance or rejection of a financial
product/provider. They possess the trust which people need in making financial decisions and
service providers need to factor their views in their design and marketing campaign.
These findings also revealed the danger which their influence portends for the economy and
their adherents. Misinformed religious leaders could ruin the financial lives of their adherents
since most of them prefer their advice to rational thinking.
Conclusion
41
The focus of the study was on understanding the roles of religious leaders in adherents’
financial decision making, and the extent to which adherents comply with the money advice of
their religious leaders. This study was informed by the need to determine whether religion
influence financial decision making and also the need to know whether religious leaders could
play significant role in diffusion of financial innovations. Findings of the study have shown
that religious leaders have strong influence on financial decisions of young people and that
their adherents see their advice as sacred and a must-obey. Since most young adults prefer their
money advice to rational thinking, efforts should be made to sensitize these religious leaders
about the new roles they have assumed. Adherents should also learn to balance spiritual insights
with rational thinking.
Recommendations
The following recommendations were made based on the findings of the study.
Religious leaders should understand the spread of their influence and become cautious of what
they say or do. Their adherents /society consciously and unconsciously imitate/obey them.
They should update their knowledge and balance spiritual insights with rationality. They should
realize that they now play economic roles and brace up for the challenge that comes with new
responsibilities. This can be achieved through establishment of training programmes for them
and their adherents, linking up with financial centres and having effective referral system for
issues that beat their capacity.
Financial service providers need to adjust their planning and strategies to the new realities. This
entails carrying religious leaders along in design and marketing of financial products. They
should be seen as critical stakeholders whose activities can affect their marketing efforts.
Adherents of various religious should understand that human beings including religious leaders
are gullible and susceptible to errors. Despite that these people are spiritually endowed, caution
should not be thrown to the wind. Recent events have shown that some religious leaders do
commit crimes and deceive people in the name of religion.
Government and regulatory agencies should understand that people flock to religious leaders
for financial decision because of lack of trust and confidence on the government, regulators
and business organizations. People doubt the information given to them because of scammers
and fraudsters that have penetrated every institution. The confidence and trust of people on
secular institutions can be restored if corruption is reduced and regulators work optimally. This
would reduce reliance on spiritual leaders for financial decisions.
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46
TRACK 2
International Aid, Economic Policies
and Strategies
47
The possible impact of establishing the BRICS New Development Bank for
Infrastructure Development in Africa
Salim Bwanali & Pantaleo D Rwelamila
Graduate School of Business Leadership, University of South Africa (UNISA), Midrand,

South Africa.
Abstract
This paper addresses the relevance of the BRICS New Development Bank whose principal
purpose is to mobilize financial resources for infrastructure and sustainable development
projects in BRICS and other emerging and developing economies. It is estimated that Africa
needs $93 billion annually until 2020 in order to bridge its infrastructure deficit. It is through
significant investment in infrastructure development that economic growth and poverty
alleviation can be enhanced. The study is a result of critical review, synthesis and
contextualization of relevant academic literature, conference and journal publications.
Introduction
The basic gap in African infrastructure development is considered a severe handicap to

growth and poverty alleviation. At the micro-level, it is recognized that an investment in
infrastructure boosts private sector activities by lowering the cost of production and opening
new markets, thereby presenting new production prospects and trade. It is therefore critical
that Africa should invest in infrastructure development (Bwanali, 2015). According to
Ondiege, Moyo & Chouchane (2013), Africa needs huge financial investments and support to
narrow the region’s infrastructure gap and set itself on par with the rest of the developing
world. African countries must therefore undertake infrastructure sector reforms and
innovation to generate more resources for the sector, because the traditional sources of
finance will not be sufficient. Globally, governments put infrastructure policy among their
paramount concerns. The upgrading of infrastructure is deemed to be critical for long term
economic competitiveness and therefore crucial to accommodating growing populations in
urbanizing environments (Urban Land Institute and Ernst & Young, 2011). The Boston
Consulting Group (2013) states that when aligned with a country’s long term goals, public
infrastructure development can enhance and sustain economic growth. Thus it is not
surprising that many governments today are investing in infrastructure as part of their
developmental agenda.
Problem statement
Infrastructure development can contribute to growth and development through several

channels such as decreasing trade transaction costs, increasing the durability of capital goods,
fostering higher trade and investment, escalating demand and supply divergence and
48
achieving economies of scale and scope (United Nations Conference on Trade and
Development, 2013). According to Ondiege, Moyo & Chouchane (2013), Africa needs huge
financial investments and support to narrow the region’s infrastructure gap and set itself on
par with the rest of the developing world. African countries must therefore undertake
infrastructure sector reforms and innovation to generate more resources for the sector,
because the traditional sources of finance will not be sufficient. The Programme for
Infrastructure Development in Africa (PIDA) projects that Africa will need to invest up to
US$ 93 billion annually until 2020 for both capital investment and maintenance. Given the
large amount involved, this requires innovative sources of funding for sustainable
infrastructure development and investment. This is where the BRICS New Development
Bank on infrastructure comes in and why it is believed that the NDB would be the game-
changer for Africa’s economic growth and development.
Objectives of the study
The objectives of this research study are as follows: (a) To identify the impact of
infrastructure development on economic growth on the African continent (b) To establish
how the BRICS New Development Bank can facilitate regional integration on the African
continent (c) To determine how the BRICS New Development Bank can develop innovative
finance models. This research study has three primary research questions namely: (a) What
role does investment in infrastructure development has in economic growth in Africa? (b)
How can the BRICS New Development Bank facilitate regional integration in Africa? (c)
How can the BRICS New Development Bank develop an innovative model for infrastructure
development? Research propositions of the study are:
Research Proposition 1: Infrastructure development under the patronage of a proposed

BRICS Development Bank will not have a major impact on economic growth in sub- Saharan
Africa.
Research Proposition 2: The establishment of BRICS Development Bank will not be able to
facilitate regional integration within sub-Saharan Africa
Research Proposition 3: It will not be feasible for the proposed BRICS Development Bank to
develop an innovative finance model for infrastructure development for sub- Saharan African
countries.
Literature review
The impact of infrastructure development on economic growth
49
The BRICS New Development Bank is a relatively new concept and development as such
access to its documentation was a challenge. Therefore the researchers relied more on
existing Development Finance Institutions (DFIs) for benchmarking. According to Ondiege,
Moyo & Chouchane (2013), infrastructure is vital for the enhancement of an inclusive and
sustainable growth. Rural infrastructure – especially feeder roads and transmission lines that
join rural communities to national grids – enable individuals, communities, and small
businesses to undertake some income-generating activities due to improved access to
electricity and links to potential markets. Blanke, Ko, Koivisto, Moyo, Ondiege, Speakman &
Chouchane (2013) argue that African countries have recorded constant growth rates, well
above 5% on average, since the early 2000s, a rate that has been momentarily interrupted by
the recent economic recession. The Commission on Growth and Development (2008) state
that sound investment in infrastructure is vital for sustained growth and development because
it increases the range of opportunities as well as the returns for private investment. In
addition, investment in infrastructure ensures access to vital public and social services such as
public transportation, health amenities and water – such services that have the effect of
supporting growth and contributing towards the distribution of the benefits of growth across
the entire population.
The case for infrastructure development
Bhattacharya, Romani and Stern (2012) concur that many emerging economies and most low
income countries require a significant injection in infrastructure investment to ease growth
limitations, respond to urbanization pressures and meet their critical goals for development,
inclusive growth, and sustainability. Strategic infrastructure, in the form of energy, roads and
ports needs to be built to spur economic growth. Furthermore, according to Bhattacharya et
al. (2012), the magnitude of the required infrastructure increase is much greater now than it
has previously been due to two reasons. First, as global trade is playing an increasingly
important role in countries’ economic development, so too must infrastructure. This includes
traditional transport infrastructure such as roads, railways and ports, but also information
technology infrastructure such as broadband networks that enable better integration of supply
chains and international trade in services (e.g., in outsourcing services). As emerging
countries develop their service and manufacturing sectors, the intensity and excellence of
infrastructure becomes critical in order to exploit network externalities. Secondly, the fast
pace of urbanization has a greater sustainable infrastructure need than before. Between 2010
and 2030 the global population will have increased by almost 2 billion, from 6.1 to 8.1
billion. Most of this growth is expected to be in the developing world, and nearly all of this
will be in urban settlements that are under-developed. Responding to these urbanization
pressures will require a massive injection in infrastructure investment, conclude Bhattacharya
et al (2012).
Infrastructure and logistics
50
The connexion between the economy and infrastructure is essential to enhancing all-inclusive
and sustainable growth and impactful development. As a matter of fact, the unusual high cost
of transportation, energy and internet connectivity is a significant economic growth inhibitor.
To a large extent, this is partially associated with Africa’s continued economic
marginalization. According to the African Union Commission and Nepad Agency (2011),
this has forced governments to upscale infrastructure for Africa in order to become more
competitive in the global marketplace. Significant investments in roads reduce transport costs
while efficient ports and other logistics infrastructure reduce the cost associated with trade,
which in the long run will improve the competitiveness of firms. Amdaji and Yeats (1995)
argue that relatively high transportation costs for finished products often place African
exporters at a tremendous competitive disadvantage. It is through the improvement of the
quality of infrastructure by landlocked countries as well as transit countries that can enable
landlocked countries to reduce the overall transportation and freight costs.
Infrastructure and poverty alleviation
It should be emphasized though that functional infrastructure does not just support growth
and trade; it also alleviates poverty through the reduction of the cost of accessing essential
social services. According to Ndulu et al. (2005) constructing rural roads in Morocco had the
effect of increasing primary school enrolment from 28% to 68%; access to clean water
reduced the prospect of infant mortality by almost 55% and the existence of a paved road in a
specific community more than doubled girls’ school attendance. At the same time, according
to Wormser (2004), a 10% increase in an index of water and sanitation had the impact of
reducing child and infant mortality by 4% to 5% and maternal mortality by 8% in the Central
African Republic. In South Africa, households without electricity spend 14% to 16% of their
disposable incomes on energy compared to only 3% to 5% for those with electricity in their
homes. In sum, improved infrastructure can lead to reduced cost of access to essential social
services which in turn leads to improved living standards and ultimately poverty alleviation.
Research methods
This study employs a qualitative research methodology to assess the influence of establishing
the BRICS New Development Bank on infrastructure development in Africa. The formation
of the BRICS New Development Bank is a relatively new concept and as such there are only
a few people that are informed on the core objectives and development of the bank at a
strategic level. Creswell (2014) concurs that a qualitative approach may be needed when the
topic is new and also when the subject has never been addressed with a certain sample or
group of people. Creswell (2014) further states that if a concept, phenomenon or theory
needs to be explored and understood because there is little literature research that has been
done on it, then it merits a qualitative approach. This therefore is the basis for adopting the
qualitative approach in this study. In order for this study to achieve its objectives, it has to
depend on a few executives for relevant information. Qualitative methods allow for an in-
depth data collection from each individual and it is compensation for the smaller sample size.
51
This report will use a case study approach. Leedy & Ormrod (2010) state that in a case study
approach, a particular individual, program, or event is studied in-depth for a definite period of
time. Creswell (2014) concurs that case studies are a design of inquiry found in many fields,
especially evaluation, in which the researcher develops an in-depth analysis of a case, often
an activity, event, process, program or one or more individuals.
Population and profile of the respondents
The population of this study includes senior executives, senior academics and senior
managers from South African based organizations such as the National Treasury, The
Department of International Relations, a foreign based DFI that funds projects of one of the
member states of the BRICS NDB and an academic institution. These senior executives and
senior managers are involved in developing the policy framework of the BRICS New
Development Bank. Due to the fact that the study deals with delicate information and that the
targeted audience has a very busy work schedule due to the nature of their job, the researcher
found it reasonable and practical to gather information from at least ten respondents.
Findings and Discussions
This section synthesizes the findings of the study by answering the research questions and
reviewing the research propositions. The principal objective is to find evidence that confirms
or refutes the research propositions and in the process indicate the linkages between the key
constructs being explored. The phrases that have been enclosed with quotation marks, in
italics below, indicate verbatim comments made by the respondents.
Research Question 1
Research question 1 sought to determine the effect of infrastructure development on

economic growth in sub-Saharan Africa. Out of this research question, the following
subthemes emerged: (a) status of infrastructure development on the African continent (b)
drivers of BRICS NDB investing in Africa’s infrastructure projects and (c) enhancement of
economic growth from infrastructure development.
Status of infrastructure development on the African continent
The respondents indicated that, in the main, there is an old stock of infrastructure which was
constructed during the colonial era and was designed with the sole purpose of taking
commodities out of the continent. This was an indication that the development of
infrastructure was only done for exploitation purposes. Two of the respondents indicated that
there is sub-standard infrastructure, it lacks maintenance and that the existing stock cannot
sustain Africa’s growing needs as an emerging economic bloc. It was also indicated that the
huge infrastructure gap which can only be alleviated by maximizing potential by investing in
infrastructure development. It was noted that there are vast areas of underdeveloped land
52
especially in rural areas across Africa. One of the respondents said that Africa has huge
potential with natural resources that still need to be exploited.
Out of the five respondents, four indicated that the existing condition of infrastructure is
affected by shortfall in funding and that this appears to be a global phenomenon. One of the
respondent said that “it is evident that the current infrastructure cannot sustain demand. It
has been widely recorded that there is a substantial gap estimated at US$93 billion annually”
.This was supported by the other respondent who said that “Africa does not raise the
estimated annual budget of US$93 billion required for developing infrastructure”.
Drivers of BRICS investing in Africa’s infrastructure projects
The respondents drew parallels between the BRICS and the Bretton Wood Institutions.
They indicated that the motivation of investing in Africa was seen as a challenge to Bretton
Wood Institutions. Thus there is need for economic dominance from other players like China
to replace the western organizations and that the idea was to create an institution that would
rival the World Bank and the International Monetary Front (IMF) so as to neutralize their
impact especially on the emerging economies. The need to neutralize the impact of IMF on
emerging economies was reinforced. This was noted by one respondent saying that
“realization that BRICS there should be no reliance on the west to release donor funds”. One
respondent said that there was need to level the playing field to include developing and
emerging economies into the Bretton Wood Institutions fold. He was further supported by
another respondent who was quoted as saying “there is so much out about the need for these
Bretton Woods institutions to transform”.
One respondent also stated that western donors consider human rights, democracy and
governance as part of conditions to economic aid. It is therefore expected that the NDB
would develop a different model based on non-interference and not meddling in other
countries’ internal politics. This should not come as a surprise taking into account how
China and Russia conduct themselves in as far as democracy and human rights are
concerned.
Enhancement of economic growth from infrastructure
Four of the respondents shared the view that enhancement of economic growth from
infrastructure can be achieved through a good road and rail network. The respondents stated
that this will result in creation of employment, an improvement in the living conditions as
well as opening up of cross border trade. One respondent stated that “it is widely accepted
that infrastructure is an enabler of economic growth and that a good network of road and
rail can facilitate an easy flow of commodities”. The second respondent stated that “a good
road and railway link, for example, can facilitate the flow of goods from one point to the
other”. Lastly, one respondent indicated that “currently there are some bottlenecks; the road
and rail networks need to be linked so that primary goods can be converted into secondary
53
and tertiary goods”. This reinforces the narrative that infrastructure development has the
potential to enhance economic growth.
Research Proposition 1: Infrastructure development under the patronage of the BRICS New
Development Bank will not have a significant impact on economic growth in sub-Saharan
Africa.
The respondents emphasized good road and railway network as key to the facilitation of
trade. This was further highlighted by three of the respondents who indicated the need for
open cross border trade. It is believed that globalization has made it possible for the
disintegration of borders between countries and that this has made trade among nations or
countries become easier than it used to be some 20 years ago. This was further reinforced by
the other respondent who was quoted as saying, “…this will in turn help in trade facilitation
at borders”. One respondent mentioned that it was widely accepted that infrastructure is an
enabler of economic growth and that a good network of road and rail can facilitate an easy
flow of commodities. The respondents acknowledged that good network systems enhance
growth through easy trade and production of goods. The flow of goods among countries
increases return on investment as countries trade. This was further reinforced by a respondent
who said that “Africa cannot grow unless it produces and this requires underlying
infrastructure to provide the platform and this can contribute to economic growth in Africa”.
Thus it is evident from the results above that the respondents are assertive that infrastructure
development under the patronage of the BRICS New Development Bank will have a
significant impact on economic growth in sub-Saharan Africa. Therefore based on the
evidence gathered, it is disproven that infrastructure development under the patronage of the
BRICS New Development Bank will not have a significant impact on economic growth in
sub-Saharan Africa.
Conclusion: It is disproven that infrastructure development under the patronage of the BRICS
New Development Bank will not have a significant impact on economic growth in the sub
Saharan Africa.
Research question 2
Research question 2 sought to ascertain how the NDB can facilitate regional integration
within sub-Saharan Africa. Out of this research question, two sub-themes emerged namely (a)
facilitation of regional integration by the New Development Bank and (b) indicators
informing the establishment of the NDB in facilitating regional integration.
Facilitation of regional integration by the New Development Bank
54
Two respondents noted that the establishment of the New Development Bank will create an
opportunity through which there will be access to global funds that would enhance
infrastructure development. One respondent stated that “the bank will have the access surely
to global capital through both equity and debt”. One respondent pointed out that it is this
access to funds that will create an environment in which it will be possible to finance any
capital projects that have the ability to boost regional integration.
One respondent pointed out that Africa is not going to be a new territory for the BRICS bloc
as almost all BRICS member states are economically active in African projects. The
respondent had this to say, “…already the individual BRICS member states such as China,
India and Brazil, are playing a role in many infrastructure projects in countries such as
Angola, Zambia, Mozambique, Tanzania, Malawi..”.
It was also noted that once the funds are available, it will be possible for the bank to invest in
sustainable projects that can link the region and thereby facilitate trade. In addition, it was
also pointed out that investing in regional projects such as the hydro power plant in DRC, that
will have capacity to bring power to the entire continent, will be more economic than
individual countries seeking own solutions.
It was evident from the respondents that there is renewed optimism on the African continent
that creation of the NDB as a vehicle for infrastructure development will promote regional
trading and cross border trade and investment. One respondent concluded by saying that the
establishment of the NDB will help realize the dream towards the African Agenda and that
African integration can only become a reality once there is substantial investment in
infrastructure development.
Indicators informing the establishment of the NDB in facilitating regional integration
It emerged from the interview sessions that there is acute shortage of infrastructure in
emerging economies and that the SADC region needs sufficient and sustainable
infrastructure. There is also acknowledgement at the highest political level within the BRICS
leadership that it is through the creation of the NDB that regional integration in the emerging
economies can become a reality. One respondent stated that there appears to be a very strong
political will amongst the BRICS leaders to ensure that regional integration becomes a reality
under the auspices of the BRICS. This political will, it is claimed, is motivated by the desire
to create a new emerging economic bloc that can challenge the Bretton Woods institutions.
Thus the BRICS leaders have decided not to place reliance on the West for the needs of their
countries and that the NBD will complement the efforts of the other global institutions such
as the World Bank and the IMF.
One respondent stated that in order for regional integration to work, it is important that
leadership has a change of mind-set where they need to realize that globalization is here to
stay and that gone are days when countries would operate in silos. It was also noted that the
55
commonalities that exist amongst BRICS members countries being emerging countries, such
as poverty and underdevelopment, are drivers in the creation of the NDB.
Research Proposition 2: The establishment of BRICS Development Bank will not be able to
facilitate regional integration within sub-Saharan Africa.
Based on the evidence gathered, the respondents were of the opinion that the bottlenecks that
exist can easily be eliminated. Regional trade can be boosted with a good and sustainable
infrastructure. Goods that are produced in one country can easily be exported into another
country with ease – efficiencies. With a good network of infrastructure such as road and rail,
there will be easy and fast movement of people and goods within the region. It is possible that
infrastructure development can enhance regional integration through the creation of linkages
within the region. There will be efficiencies that will be realized in the sense that the flow of
goods through the border posts will be smoother, the existing physical borders will eventually
collapse thereby enabling easy access similar to the EU bloc and lastly there will be
connectivity across countries.
It is therefore disproven that the establishment of BRICS Development Bank will not be able
to facilitate regional integration within sub-Saharan Africa.
CONCLUSION: It is disproven that the establishment of BRICS Development Bank will not
be able to facilitate regional integration within sub-Saharan Africa.
Research Question 3
Research Question 3 sought to discover how the NDB can develop an innovative finance
model for infrastructure development. Three sub-themes emerged from the research question
as follows: (a) sources of funding for the BRICS (b) funding of infrastructure projects and (c)
role of NDB in funding of sustainable projects.
Sources of funding for the BRICS
All the five respondents indicated that the NDB will raise its funding from the agreed
contribution of US$50 billion that the member countries have agreed to make. It is also the
understanding of at least two of the respondents that the NDB would operate as a fully-
fledged commercial outfit with the capacity to raise funds through issuing of bonds and other
instruments. One other source of income, according to three respondents is by levying
interest on loans. One respondent was quoted as saying, “You might be aware that the July
2014 Fortaleza Declaration agreed that the member states will contribute US$50billion as
called up capital. There will also be loans from financial institutions in return for interests.
Largely this is going to come from contributions from member countries. The bank should
56
also be in a position to issue bonds in the market.” In addition, another respondent said
“…the bank should be in a position to attract global capital markets on sound financial and
economic principles. The five member countries will contribute $50 billion each over a
period of time. The bank will operate as a fully-fledged financial institution that will raise
capital just like any other commercial bank”.
In addition, the respondents believe that the NDB will not be as rigid as the Bretton Wood
Institutions in disbursing loans. It is believed that the NDB would still apply sound business
principles on its lending policy. This is what one respondent had to say on the matter, “…the
bank will lend to qualifying countries on terms and conditions to be agreed upon. The bank
will recoup the loans together with interest charged”. One respondent highlighted the
creation of the Contingent Reserve Agreement that will make provision of forex reserves to
countries with a need.
It is apparent that since the NDB is still in its infancy, not much is known about its financing
model. This is based on limited information that came from the respondents.
Funding of infrastructure projects
At least three respondents stated that the NDB will use the paid up capital of US$50 billion.
Two respondents pointed out that ideally the bank is likely to invest in sustainable projects.
One respondents stated that Africa has unlimited projects. This is what the respondent had to
say, “…there is no shortage of projects in Africa: what is needed is a portfolio of bankable
projects in order to attract potential investors. These projects will be funded by financial
resources that the bank will mobilize. However what is critical for Africa is sound capacity in
project preparation”. One respondent mentioned that “…it is also expected that the bank
will approach investors that are prepared to take risk in Africa for higher returns. The NDB
will not be a donor but will invest in projects that will yield sustainable returns. It is believed
that the initial contribution of US$ 50 billion will be used to fund the necessary infrastructure
projects.”
The role of the NDB in the funding of sustainable projects
The respondents highlight that project preparation is key to infrastructure development. They
state that the NDB should establish and create capacity for project preparation. This is based
on the fact that only bankable projects have the potential of being implemented. One
respondent stated that “…the bank should have a unit that focuses solely on project
preparation as this is the means through which projects are selected. Therefore the NDB
should create project preparation capability as a way of ensuring that potential projects are
funded”.
According to another respondent, “…there are numerous potential projects in Africa. The
challenge has been capacity in project preparation. The bank will should establish a unit that
57
will assist with project preparation in order to ensure that funding for such projects is
secured. Investors are keen on taking risks for bankable projects for sustainable yields”.
Another respondent confirmed by stating that “the bank should assist in project preparation
to enhance the chances of soliciting funding. The bank should create capacity for project
preparation. Africa is not in short supply of project what is missing is bankable projects”. He
went on to say that it is only through project preparation that any project can have a chance of
getting funding. “The problem in Africa is that projects are not being funded due to lack of
project preparation. An example is the Inga Power Project in the DRC which was
conceptualized in 2002 but due to lack of project preparation the project still has a long way
to go before completion”.
Research Proposition 3: It will not be feasible for the BRICS New Development Bank to
develop an innovative finance model for infrastructure development for sub-Saharan African
countries.
The respondents were of the view that the NDB should explore innovative funding models;
the NDB should be independent of traditional donors and lastly should be creative and
flexible in its approach. The respondents were quoted as saying, “…due to the large number
of projects that are critical, the bank should devise innovative methods to fund infrastructure
development. Innovative funding model should unlock the need of capital investment. The
financial crisis has negatively affected traditional donor countries”. Another respondent
stated that “the BRICS should tap in their own financial resources to supplement funding for
infrastructure development. Current global financial crisis has limited the supply for donor
funds. The traditional western donors are facing economic stagnation hence the need for
other creative and innovative funding models”.
Therefore based on the evidence gathered, it is disproven that it will not be feasible for the
proposed BRICS Development Bank to develop an innovative finance model for
infrastructure development for sub-Saharan African countries.
CONCLUSION: It is disproven that it will not be feasible for the BRICS New Development
Bank to develop an innovative finance model for infrastructure development for sub-Saharan
African countries.
This section synthesized and analyzed the results of the study. All research propositions were
disapproved thereby confirming that (a) infrastructure development under the NDB will have
a significant impact on economic growth in the sub-Saharan African region, (b) the NDB will
be able to facilitate regional integration with sub-Saharan Africa and (c) it is feasible for the
NDB to develop an innovative finance model for infrastructure development for sub-Saharan
African countries.
58
Conclusions
This study has proven that the impact of infrastructure development on economic growth is
significant. This reaffirms the fact that infrastructure is at the center of inclusive growth that
has the potential to create sustainable jobs, reduce social inequalities and thereby offer
unlimited economic opportunities to the African population. Over the recent years, Africa has
experienced significant economic growth and it is expected that this trend will continue for
the foreseeable future. Despite this tremendous achievement, one thing that might stall
Africa’s growth trajectory is its lack of sustainable infrastructure. Much as lack of funding for
infrastructure development has been identified as the primary reason for infrastructure
backlog in Africa, there are other areas that require urgent attention if Africa is to remain a
preferred destination for foreign direct investment, at a time of shallow economic recovery in
most developed economies.
Recommendations for future research
This study was undertaken at a time when the NDB was not yet functional although decisions
had been made by the BRICS leadership to establish the NDB. It will be important to
undertake similar studies once the bank is operational so as to assess its impact on the global
geopolitical landscape. However the objectives of the study which were (a) to identify the
impact of infrastructure development on economic growth in the sub-Saharan African region,
(b) to establish how the BRICS New Development Bank can facilitate regional integration
within sub-Saharan Africa and (c) to determine how the BRICS New Development Bank can
develop innovative finance models have been met.
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Occupational Health Hazards: Reducing Environmental Health Effects Of

Electrical/Electronic Equipment On At-Risk Groups In Enugu, Nigeria
O.C. Eneh*, J.C. Agunwamba, P.A. Akah and J.U.J Onwumere

University of Nigeria, Nsukka
* Author for correspondence: O.C. Eneh, Institute for Development Studies, Enugu Campus,
University of Nigeria, Nsukka; +234-803-338-7472; onyenekenwa.eneh@unn.edu.ng
60
Abstract
Electrical/electronic equipment (EEE) and waste electrical/electronic equipment (WEEE) emit

hazardous gases of lead, beryllium oxide and other toxic chemical components that pollute the
air, leading to occupational hazards and deleterious environmental pollution health effects on
the at-risk groups (WEEE scavengers and EEE repairers). This pilot project was aimed at
reducing occupational environmental pollution hazard among the at-risk groups in Enugu,
Nigeria. Specific objectives were to ascertain the ignorance of at-risk groups of emission of
hazardous gases and toxicity from EEE/WEEE, and to enlighten the at-risk groups on
occupational safe practices. Clusters of EEE repairers were identified in neighbourhoods in
Enugu. Snowball sampling technique was employed to get at EEE repairers that did not belong
to the clusters as well as scavengers who brought goods to EEE repairers. A questionnaire was
used to elicit information on objectives, while focussed group discussion (FGD) was employed
to enlighten the target on the need to reduce occupational health hazards arising from
environmental pollution by toxic emissions. The average mean score (AMS) technique was
used to analyse the likert-scale data from the questionnaire, while pre- and post-FGD data were
regressed to determine whether or not change took place during FGD. Results showed that the
at-risk groups were not aware of emission of hazardous gases from EEE and WEEE nor the
environmental pollution by toxic emissions from EEE/WEEE. The enlightenment exercise on
the occupational environmental health hazard and the need to embrace safe occupational
practices created awareness among the at-risk groups. Recommendations included more
awareness creation on the problems and on safe occupational practices, as well as making of
appropriate policy to control careless handling of EEE/WEEE.
Keywords: Occupational hazard, Environmental health, Toxic emission, Electrical/electronic
equipment, Waste electrical/electronic equipment
Introduction
In the digital age, there is increasing dependence on electrical/electronic equipment (EEE) for
social and economic activities in developing countries.National governments provide public
access to the information communications technology (ICT) facilities in order to instigate
social and economic development and address the marginalisation in the global market system.
Consequently, EEE business (sales and repairs) is growing rapidly in Nigeria, and so is the
generation of waste electrical/electronic equipment (WEEE).
By containing some toxic chemical substances, WEEE can be hazardous on exposure to man
through inhalation of air polluted by emissions from them, skin absorption and/or swallowing
(Eneh, 2012 a, b). At-risk groups are scavengers of WEEE and repairers of EEE (Alo, 2009).
Reports (eWASA, 2009) have shown that they are neither aware nor mindful of this hazard, let
alone exercise the necessary caution in handing EEE (see Plates I-III). This pilot project was
aimed at ascertaining the ignorance of the at-risk groups of the emission of hazardous gases
from EEE/WEEE and the toxicity of EEE/WEEE arising from environmental pollution by toxic
emissions from EEE/WEEE, as well as creating the necessary awareness on the problem and
the need to adopt occupational safe practices (Eneh, 2012a).
61
EEE/WEEE emit hazardous gases of lead, beryllium oxide and other toxic chemical
components that pollute the air inhaled by and absorbed through the skin of people, especially
the at-risk groups (EEE repairers and WEEE scavengers). The chemical components can also
be swallowed through hand-contact. These lead to deleterious environmental health effects on
the at-risk groups (Eneh, 2012 a, b; Eneh and Agunwamba, 2011; Eneh and Mba, 2012).
Plate I: E-waste dismantling I Plate II: E-waste dismantling II Plate III: E-waste dising I
Source: eWASA, 2009
Inhalation of dust and fumes containing lead compounds cause the disease called morbi
metallic (Eisinger, 1982 in Eneh, 2012b). According to World Health Product (2010), the
primary cause of lead poisoning in adults is inhalation of lead emission. Lead poisoning affects
many different parts of the body.
The main body compartments that store lead are the blood, soft tissues, and bone. In adults,
94% of absorbed lead is deposited in the bones and teeth, but children store only 70%, a fact
which may partially account for the more serious health effects on children (Xu et al, 2009;
Watts, 2009; Spitz et al, 2008; Flora et al, 2008; Brodkin et al. 2007; White et al, 2007; Patrick,
2006; Lanphear et al, 2005; Fujita et at, 2002).
According to U.S. CDC (2009), Woolf et al (2007), Ekong et al (2006), Gemmel et al (2002),
and Campbell et al (2000) Shadick et al (2000), lead affects the peripheral nervous system
(especially motor nerves) and the central nervous system. Lead poisoning interferes with the
normal development of a child’s brain and nervous system; therefore children are at greater
risk of lead neurotoxicity than adults are. In a child’s developing brain, lead interferes with
synapse formation in the cerebral cortex, neurochemical development (including that of
neurotransmitters), and organization of ion channels. It causes loss of neurons’ myelin sheaths,
reduces numbers of neurons, interferes with neurotransmission, and decreases neuronal growth
(Park et al, 2008; Cleveland et al, 2008; Navas-Acien, 2007).
Lead affects every organ of the body, leading to hearing loss, tooth decay, kidney damage,
nephropathy, Fanconi syndrome, gout, and other serious health disorders (Bellinger, 2008,
2005, 2004; Guidotti and Ragain, 2007). Lead exposure is associated with high blood pressure,
62
coronary heart disease, heart rate variability, cardiac automatic dysfunction and death from
stroke (Xu et al, 2009; Pokras and Kneeland, 2008; Lanphear et al, 2005). Lead poisoning
affects both the male and female reproductive systems. In men, when blood lead levels exceed
40 μg/dL, sperm count is reduced and changes occur in volume of sperm, their motility, and
their morphology. A pregnant woman’s elevated blood lead level can lead to miscarriage,
prematurity, low birth weight, and problems with development during childhood. Lead is able
to pass through the placenta and into breast milk, and blood lead levels in mothers and infants
are usually similar. A foetus may be poisoned in utero if lead from the mother’s bones is
subsequently mobilized by the changes in metabolism due to pregnancy (Moss et al, 1999).
Beryllium and its compounds are toxic (Murali, 2009; Daintith, 2000). Beryllium oxide is
highly toxic. According to Lacombe (2001), beryllium oxide has pretty much the same effects
on health as asbestos; it makes pollution worse, and is toxic by inhalation and ingestion.
Beryllium compounds are probable human carcinogens, serious respiratory irritants and may
be harmful by skin contact. Hence, there is the warning that breathing the dust or powder of
beryllium oxide must be avoided.
The regular, direct and close contacts of at-risk groups with WEEE/EEE enhances the chances
of inhalation of lead and beryllium oxide emissions, absorption through skin contact, and
swallowing through finger contact. In a report (Eneh, 2014), electronic products haandlers were
ignorant of WEEE toxicity, and this calls for interventions to reduce occupational health
hazards on at-risk groups in Nigeria (Eneh, 2011; Eneh and Agunwamba, 2011; Eneh, 2012 a,
b).
Pokras and Kneeland (2008) observed that lead poisoning is entirely preventable by, among
others, avoiding exposure to lead. One way to reduce EEE/WEEE occupational health hazards
on at-risk groups in Nigeria is to enlighten the at-risk groups on EEE/WEEE toxicity and to
persuassively enlighten them on the need to adopt safe occupational practices.
This pilot project was aimed at ascertaining the ignorance of at-risk groups of emission of
hazardous gases from EEE/WEEE, ascertaining the ignorance of at-risk groups of the toxicity
of EEE/WEEE arising from environmental pollution by toxic emissions from EEE/WEEE, and
to enlighten the at-risk groups on occupational safe practices.
Nigerians will benefit from this project in that occupational hazards will be reduced among
EEE repairers and WEEE scavengers. Environmental health hazards and attendant life tolls
and associated ill-health inconveniences and expenses will be minimised. Knowledge of
environmental policy-makers will be improved for updating policies to better control the
identified occupational environmental pollution health hazards. Researchers will find the
empirical study very useful and as a basis for further work.
63
Methodology
Enugu is the capital of Enugu State, Nigeria, as well as the capital of the defunct Eastern
Nigeria. It is populated by a homogenous Igbo ethnic group known for entrepreneurial dexterity.
Entrepreneurship is presently driven by ICT (Eneh and Nkamnebe, 2011). Eastern Nigeria has
been described as the “Nigeria’s home of business minds” (Eneh, 2005: v). ICT markets (sales
and services) abound and are fast growing in Enugu, with the concommitant generation of e-
wastes with toxic chemical components. Hence, it is rational to start with a pilot study in Enugu
metropolis, Southeast Nigeria.
The project sought to ascertain the ignorance of at-risk groups of emission of hazardous gases
from EEE/WEEE, to ascertain the ignorance of at-risk groups of the toxicity of EEE/WEEE
arising from environmental pollution by toxic emissions from EEE/WEEE, and to enlighten
the at-risk groups on occupational safe practices. The area of the study, Enugu metropolis, has
been adequately described by Eneh and Anamalu (2012).
Clusters of EEE repairers in neighbourhoods of Enugu were identified and used as platforms
to contact EEE repairers. Snowball sampling technique was also used to get at EEE repairers
that did not belong to the clusters, as well as scavengers who brought goods to EEE repairers.
Questionnaire was used to elicit information on the first and second objectives, while focussed
group discussion (FGD) was employed to enlighten the target on the need to reduce
occupational health hazards arising from environmental pollution by toxic emissions from
EEE/WEEE. Pre- and post-FGD questionnaire administration enabled ascertainment of the
enlightenment that had taken place during FGD. The average mean score (AMS) technique
was used to analyse the likert-scale data from the questionnaire and to test hypotheses, while
pre- and post-FGD data (calculated values) were regressed to determine whether enlightenment
took place during FGD.
The decision value (DV) was calculated as the average of the five likert scale-points, as follows:
DV = 5+4+3+2+1 = 15 = 3
5 5
The calculated value (CV) was obtained with the formula:
CV = ∑fx
Where f is frequency
x is scale-point
64
The calculated value (CV) was compared with the decision value (DV). If CV was greater than
DV, the response was regarded as in the affirmative. Otherwise, it was regarded as in the
negative.
Decision rule
If DV > CV, null hypothesis was accepted as being true. But, if DV < C.V. null hypothesis was
rejected as untrue and the alternative hypothesis was accepted as true.
Results and Discussion
Results showed that at-risk groups were aware of neither the emission of hazardous gases from
EEE/WEEE nor the toxicity of EEE/WEEE arising from environmental pollution via toxic
emissions from EEE/WEEE. These manifested in careless occupational practices that enhanced
occupational health hazards arising from exposure to emissions of toxic gases from
EEE/WEEE and ill-health inconveniences and expenditures. The enlightenment exercise on
the occupational environmental health hazards and the need to embrace safe occupational
practices created awareness among the at-risk groups. This might need to be sustained through
repeated exercises, as hit-and-run enlightenment contacts do not make for lasting learning.
Findings confirmed earlier reports of Eneh (2012 a, b; 2014) that handlers of EEE were ignorant
of the emission of toxic gases from the EEE and ignorant of the toxicity of EEE arising from
environmental pollution by toxic emissions from EEE.
Conclusions and Recommendations
All respondents were completely ignorant of the emission of toxic gases from the EEE and of
the toxicity of EEE arising from environmental pollution by toxic emissions from EEE. They
only learnt of these facts during the enlightenment exercise (FGD). It is, therefore,
recommended that more awareness creation on the problems and on safe occupational practices,
as well as making of appropriate policy to control careless handling of EEE/WEEE should be
embarked upon by government and non-governmental organisations.
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68
TRACK 3
Entrepreneurship, Small Business
and the Informal Sector
69
Indigenous Leadership From Unlikely Source: The Rewriting the Global
Entrepreneurship Story by the Maasai
Eileen Kwesiga, Bryant University, USA, ekwesiga@bryant.edu
Norma Juma, Washburn University, USA, norma.juma@washburn.edu
Joy Olabisi, Rochester Institute of Technology, USA, jolabisi@saunders.rit.edu
Benson Honig, McMaster University DeGroote School of Business Hamilton Ontario,

bhonig@mcmaster.ca
Abstract
Access to trade and international markets is fundamental for marginalized indigenous

communities in poor countries. We study the inter-linkages of compassion, trust and social
capital as an indigenous community strives to cultivate a sustainable business opportunity with
international partners. The indigenous community utilizes a compassion framework to initiate
a partnership with an international non-governmental organization (NGO) and a multinational
organization. Our findings suggest compassion and social influence leveraged through trust are
integral in sustaining relationships, and building social capital for international social venture
creation. We also examine the role of brokers in spanning such institutional and cultural chasms.
INTRODUCTION
While research in management and business has well-established roots in both Europe and
North America, the US model continues to lead and diffuse world-wide (Antunes & Thomas,
2007). This has had obvious implications for international business scholarship, where research,
models and perspectives developed in the west tend to dominate the landscape, and where
cultural environments that fail to match normative expectations are either ignored or ‘managed’
(Zaheer, 1995). Extending scholarship to nonwestern environments is critical not only to
establish generalizability, but to examine postcolonial relationships, including cultural
practices based on diverse historical and indigenous2 third world experiences, as well as the
2 “indigenous” refers to original ownership and affinity with the natural environment (International Labor
Organization, 1991).
70
articulation of globalization and the introduction of hybrid ideas and practices (Ozkazanc-pan,
2008).
Entrepreneurship is an important field to consider due to the impact of globalization in the third
world, the implications of entrepreneurship for economic success, the role in establishing
sustainability, and the importance of the triple bottom line (Cohen & Winn, 2007; Leff, 1979).
As with international business, most entrepreneurial research has focused primarily on western-
oriented, non-indigenous entrepreneurs, though recently, limited studies have investigated the
entrepreneurial attitudes of indigenous entrepreneurs (Foley, 2008; Light & Dana, 2013;
Lindsay, 2005). In this study, we are concerned less with the individual characteristics of the
entrepreneur and their institutional environment (Herron & Sapienza, 1992; Mair & Marti,
2005), focusing instead on the role of compassion as a precursor or motivator for the
development and internationalization of new entrepreneurial opportunities for indigenous
peoples in a developing country.
The existing literature on compassion has primarily focused on the role of the individual
receiving or giving compassion and the resulting effects in organizations (Dutton et al. 2006;
Frost et al. 2000). In this study we seek to expand the concept to include international business
and strategic alliances since social entrepreneurship is increasingly taking on both a global and
a local character (Carayannis & Von Zedtwitz, 2005; Husted & Allen, 2006). We propose that
compassion as a prosocial motivator is instrumental in influencing the different entities to seek
partnership with one another. This study helps to fill an important gap by illuminating how
compassion motivates the creation of an international social venture. We are unaware of any
research previously conducted exploring the roles of compassion, trust and social capital in the
creation of a global social venture between an indigenous community and international partners
(non-government organization and multinational).
Uniquely, we examine these relationships through the intersection of a Multi-National

European firm, a global Non-Governmental Organization (NGO), and a traditional nomadic
indigenous community. Our case study employs existing theoretical frameworks, including the
role of compassion, trust, brokerage, and social capital in establishing new constellations of
institutional relationships. Our work provides unique insight into the evolution of trust and in
understanding how compassionate relationships are developed by specific dedicated brokers.
We seek to understand the role of brokers both from the indigenous community and the
international non-government organization and the mediating roles they assume as they use
social capital to bridge structural holes to create and sustain an international social venture. To
date, the literature has largely overlooked cases where network relations are so asymmetrical
that conventional network ties are ineffective. Our study broadens the trust literature beyond
the individual/interpersonal level as we question the nature of multinational and indigenous
entrepreneurship collaborations. We argue that trust evolves differently between the different
71
partners, and we also explore the nature of trust and how these relationships are developed by
specific dedicated brokers. We begin with a discussion of compassion, followed by a short
review of social capital and trust, before providing an analysis and summary discussion of our
case study.
THEORETICAL BACKGROUND
Examining the Process of Compassion in International Social Venture Creation
Social enterprises are hybrid organizations that often combine profit and nonprofit tactics to
create viable solutions for their beneficiaries while providing a return to concerned investors
(Austin et al. 2006; Mair & Marti, 2006). While social venture creation may be influenced by
many external factors, internal motivations, such as compassion, are important (e.g., see Dees,
2007; Grimes et al. 2013; Miller et al. 2012). Miller et al. (2012) specifies the mechanisms
through which compassion facilitates social entrepreneurship. While compassion is relatively
new in international business and organizational studies, the construct spans time and
disciplines (Frost et al. 2006). From early philosophical work to recent contemporary social
science, compassion is described as being both innate and socially related to others (Aristotle,
1939; Keltner, 2009; Nussbaum, 2001; Rousseau 1979).
Compassion is an “other” related emotion and its definition encompasses emotional

connectivity to others’ feelings and sufferings (Blum, 1980). It has been described as a healing
force in organizations (Frost et al. 2006). Boyatzis, Smith, and Blaize (2006) conceptualize
compassion in a managerial context as having three components: understanding the feelings of
others (emotional connection), caring for others, and acting in response to other persons’
feelings without expecting benefits thereof. Others suggest that compassion encompasses the
desire to help others without the expectation that there will be reciprocity (Bateman & Porath,
2003; Frost, Dutton, Worline, & Wilson 2000). Miller et al. 2012 theorize that compassion
entails a cognitive evaluative process that encompasses active and informed decision making
and therefore can increase the likelihood of social entrepreneurship by encouraging higher
levels of integrative thinking, a more prosocial form of weighing costs and benefits, and
commitment to alleviating others' suffering.
We use and test the Miller et al. (2012) categorization of compassion as a prosocial motivator
framework to explore whether compassion triggers higher levels of integrative thinking, a more
prosocial form of weighing costs and benefits, and commitment to alleviating others' suffering
to create symbiotic international ventures that positively impacts the lives of others.
Social Venture Creation via the Compassion Framework (Integrative Thinking, Cost Benefit
Analysis, and Alleviation of Suffering)
72
Social venture creation relies on integrative thinking because this form of entrepreneurship
encompasses both social and economic objectives which are inherently very different (Emerson
& Twersky, 1996; Tracey, Phillips & Jarvis, 2011). As a prosocial motivator, compassion
encourages openness to new ideas and innovativeness for problem solving, referred to as
integrative thinking (Miller et al. 2012). Compassion influences concerned partners to conduct
an investigative search for information that benefits others as opposed to self.
The creation of international ventures is challenging, especially since the risks are high and the
benefits are unknown. Social ventures are even more challenging due to funding constraints
and revenue streams required for sustainability (Mair & Marti, 2009; McMullen, 2011).
Compassion-driven prosocial cost-benefit analysis focuses on others' suffering which is seen
as unwarranted (Goetz et al. 2010; Nussbaum, 1996, 2001). Prosocial cost-benefit analysis can
influence concerned partners to cognitively evaluate information that would predict the
likelihood of success, such as other similar successful ventures, and focus less on the possibility
of failure (Miller et al. 2012; Tversky & Kahneman, 1974).
Creating social ventures in subsistence markets, located at the base of the pyramid (Webb,
Kistruck, Ireland, & Ketchen Jr, 2010) where structural holes exist, requires deep commitment
(Austin et al. 2006; Elkington & Hartigan, 2008; Mair & Marti, 2009). Personal contact with
the beneficiary can serve to heighten the commitment and create an emotional connection.
Frequent and long duration contact is likely to increase affective commitment as the benefactor
develops a close sense of identification and learns more about the beneficiary (Gutek et al.
1999; Lawler & Yoon, 1998). Commitment to others can result in a greater persistence and
motivation to act so as to not disappoint the other. This can also result in a greater search for
more creative solutions than when one is making decisions for oneself. In the next section we
discuss trust and its role in new venture creation.
Trust: The Journey to Developing a Sustainable Venture
Trust plays an important role in the establishment of organizational compassion, because

without trust, there is no legitimacy, which serves as the basis for both the recognition and the
shared feelings that are required for the organizational compassion processes to occur (Kanov
et al, 2004). Trust is a necessity in coordinating complex organizations or partnerships where
interdependency is needed to achieve organizational goals (Granovetter, 1985; Pennings &
Woiceshyn, 1987; Zucker, 1986). International exchange research has identified trust as an
important ingredient for maintaining trading relationships between various international
partners with different interests (e.g., Lee, Sirgy, Brown, & Bird, 2004; Madhok, 1995; Parkhe,
1993). In situations where there is uncertainty and complexity, such as in international
partnerships, sustained and coordinated action is only possible through trust (Thompson, 1967).
While there are different kinds of trust, we focus on interpersonal trust which can further be
73
delineated into cognitive and affective trust. These forms of trust are most pertinent to the
intricacies of forming a new venture.
Cognitive trust is the belief in the competence and responsibility of the partners involved
(Barber, 1983; Cook & Wall, 1980; Shapiro, 1990). It constitutes rational assessments that
individuals use as a platform to evaluate whether others are worthy of being afforded trust
(Lewis & Wiegert, 1985). Cognitive trust also draws from a character-based perspective of
trust where characteristics such as integrity, dependability, fairness, and ability are the basis
for formulating trusting relationships (Dirks & Ferrin, 2002). Cognitive trust relies on external
demonstrations while affective trust relies on internal motives. It is suggested that some level
of cognitive trust is necessary to establish affective trust (McAllister, 1995).
The affective component of trust consists of the emotional bonds between individuals (Lewis
& Wiegert, 1985). Emotional investments linking individuals are the basis for affectionate trust.
These relationships are evidenced by genuine care, concern for the welfare of partners, and the
belief that sentiments are mutually experienced by all partners (Pennings & Woiceshyn, 1987;
Rempel et al. 1985). Research affirms that individuals in communal relationships, such as those
found among indigenous communities, are more inclined to be aware of the needs of others as
each member is expected to respond to the needs of others (Clark & Mills, 1979). Trust is
especially essential in indigenous communities which are more relationship-oriented and where
practices are heavily based on engrained cultural values.
Bridging Structural Holes using Social Capital
Social capital is composed of trust at the group level. It provides for the lending of important
resources and the transfer of knowledge and important information that enables group activity
to function more effectively and efficiently. For indigenous communities, social capital is
critical as it leverages both existing resources, as well as utilizes traditional norms of
community development, in contrast with individual-based models (Peredo et al, 2004). These
communities are typically rich in “bonded” social capital (Putnam, 2000), where close
relationships and inward-looking tightly knit communities are regarded as having closure
(Coleman, 1988). While closure helps indigenous communities with survival, it is less useful
when dealing with the outside world, and can actually constrain economic development due to
normative redistribution requirements (Light & Dana, 2013). For this, bridging social capital
is essential, consisting of reaching across different communities in order to establish new
relationships, knowledge, and trust (Putnam, 2000).
Facilitating a transnational social enterprise requires building social capital with all the partners
concerned. In subsistence markets where indigenous communities function, social isolation and
a disconnect between them and external markets exists, creating structural holes, closing off
74
the community to benefits available in the wider domestic and international marketplace (Burt,
1997). These structural holes create brokerage opportunities in a network. The ability of the
broker to bring together two parties that would otherwise be disconnected creates increased
social capital by facilitating the flow of information and projects that bring together people
from opposite sides of the holes.
The Role of Brokers in Facilitating International Social Venture Creation
Connecting indigenous communities with multinational enterprises requires a very specific set
of relationships not commonly found in conventional market structures. Indigenous
communities such as the one in this study are not fully engaged with contemporary markets, as
they make much of what they consume using traditional methods from locally available
products. Bourdieu uses the notion of habitus to explain how different norms form our social
reality. Habitus is “a product of history that produces individual and collective practices. .It
ensures the active presence of experiences, which, deposited in each organism in the form of
schemes of perception, thought and action, tend to guarantee the ‘correctness’ of practices and
their constancy over time, more reliably than all formal rules and explicit norms” (Bourdieu
1990, p. 54). Of course, what constitutes social capital for the indigenous community is very
different than what constitutes social capital for the multinational organization, as each inhabits
a very different habitus. Because of the wide divergence between their habitus, a unique form
of social brokerage is essential.
Conventional social capital and network theory acknowledge the role of brokerage in
connecting indirect contacts with direct contacts (Burt, 2007; Mizruchi & Stern, 2001).
Connecting between different networks provides increased information flows for mature
capital markets, yielding consequent returns. Work examining these relationships includes
venture capital (Sorenson & Stuart, 2001), banking (Burt, 2007; Mizruchi & Stern, 2001) and
patenting (Owen-Smith & Powell, 2004; Stuart & Podolny, 1996), to name just a few. However,
all the cases we are aware of entail individuals that basically share the same habitus. While the
individuals studied may be bankers for different companies, or work for different venture
capital firms, they share the same common social reality platform, often the same language,
social background, and cultural capital. Examining how radically different networks are
spanned by radically different sets of network habitus represents a research gap this study fills.
In the next section we introduce the Indigenous Community (Maasai), an international NGO
(ADCAM) and the multinational organization (Pikolinos).
Background Information on the Maasai, Adcam and Pikolinos Communities
75
The Indigenous community (Maasai) resides in both Kenya and Tanzania and their land is
home to the most abundant wildlife populations on earth (Homewood, Kristjanson & Trench,
2009) and the world’s most renowned national parks (i.e., Serengeti, Maasai Mara, Amboseli,
Tsavo) with over a million tourists generating over $1.5 billion in revenues (Homewood et al.,
2009). The governments of both Kenya and Tanzania over the last several decades have
severely encroached on the valuable Maasai land leading to undue hardship on the community.
The Maasai recognize their position at the base of the pyramid, and understand their need to
diversify their options. Their traditional pastoralism, which has been the core of their identity,
is increasingly no longer feasible. They recognize that education and better employment
options are necessities for the future of the community. Many are involved in subsistence
entrepreneurial efforts such as cattle trading and selling crafts to tourists. The Maasai are
known for their crafts, especially beadwork that has a unique characteristic. Their small scale
businesses operate in subsistence markets characterized by acute institutional voids with strong
informal community-based institutions (Khanna & Palepu, 1997; Mair, Martí, & Ventresca,
2012). These voids discourage investors as they offer limited protection of property rights or
breaches of contracts. It is under these circumstances that Kikanae, a young and precocious
Maasai, emerged as a broker for the Maasai community, seeking outside sustainable
partnerships for the advancement of his community.
The international NGO, ADCAM International, was founded by Rosa Escandell in 2005.
ADCAM International’s mission is to connect the supply (goods and services rendered by the
disadvantaged communities) and the demand (mostly markets in the developed nations) in a
fair trade and socially responsible manner. ADCAM International understands cost structures,
deadlines, quality control and the value of brand equity for a fair return on investment. They
respect the communities’ rights to determine the terms and pace of their development. ADCAM
through Rosa was the broker between the Maasai and the multinational organization
(Pikolinos).
Pikolinos was founded in 1984. By 2003, it had extended its presence to over 60 countries
worldwide. The Pikolinos Group vision entails a desire to create social value, economic value,
and environmental consciousness. They pride themselves on crafted production and a diverse
body of employees. Pikolinos Group’s commitment to creating social value is evident in their
collaboration with over 16,000 families worldwide.
The Maasai Project (Maasai, ADCAM, and Pikolinos international social venture)
The Maasai Project was established in 2011 to create a sustainable social venture for the Maasai
community, which involved the Maasai women creating authentic beadwork for Pikolinos
footwear. ADCAM created a local chapter (ADCAM Kenya) and equipped the local people
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with valuable skills like logistics management, leadership strategies, and basic bookkeeping,
with the hopes of phasing out the presence of the international NGO and allowing the local
community to manage the projects on their own. Kikanae the Maasai broker is also the local
ADCAM chapter Director. Beginning with twenty women artisans, the project has grown to
employ about 1,600 women in Kenya and Tanzania, and the project continues to grow.
METHODS
We adopted data triangulation by using different data collection strategies and different data
sources to ensure construct validity (Eisenhardt, 1989; Gibbert & Ruigrok, 2010; Yin, 2003).
The authors were in contact with ADCAM International and Pikolinos for four years prior to
the data collection. We conducted face-to-face in-depth interviews with key individuals
involved in the entrepreneurial partnership (Weiss, 1994). One co-author travelled to Kenya in
spring 2014 to collect data from the Maasai community and Cristina Pérez Fortes, ADCAM’s
Program Coordinator. Interviews were conducted at Maasai Mara in Northern Kenya with
numerous members of the Maasai Community. Thereafter, collection took place in Spain,
where Juan Peran Bazan (Vice President, Pikolinos Group) and Rosa Escandell (President and
Founder, ADCAM (International)) were interviewed. The majority of our interviews were
conducted in English; some of the Maasai community interviews with Maa-speaking
informants were conducted with the assistance of a local interpreter. Each interview lasted
between 10 minutes and two hours, was video-recorded, and later transcribed.
Our data are also supplemented with participant observation. During these observations, field
notes were taken on site to capture other occurrences that further illuminate the inner workings
of the partnership. In addition to interviews and observations, we were also given access to
archival documents, including annual reports, presentation kits, and promotional videos. These
documents provided a more robust understanding of the international partners and also
provided the context within which the Maasai project was situated, both at ADCAM
(International) and Pikolinos. The authors made follow up phone interviews and email
correspondences to verify ambiguous or missing information as well as reconcile variations
from different sources of information. A full summary of the interview and participant
observation details can be found in Appendix A. All participants signed an informed consent
form. Appendix B includes a sample of some of the interview questions.
We used the qualitative analysis software NVivo 10.0 to conduct our analysis. We first created
an initial list of codes that aligned with the major constructs that we were studying: compassion,
trust, and social capital (Miles & Huberman, 1994). Subsequently, following an interpretive
analysis, two authors independently conducted a microanalysis of all the data. That is, we
performed a detailed examination and review of all the data from each data source to ascertain
categories and themes (Boyatzis, 1998). Then two authors did a comparison of their
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independent analysis and discussed and reconciled any differences in coding. Since we were
exploring compassion, trust, and social capital within the Maasai-ADCAM International-
Pikolinos entrepreneurial partnership, we coded for occurrences of each of these constructs
across all three partners. We used theoretical ideas from the literature to generate multiple
perspectives of the categories. We coded all interviews and archival data, using open coding
(Gibbs, 2002; 2008). We then identified common constructs that were supported by the
findings.
ANALYSIS AND FINDINGS
Compassion
These results provide evidence that the engines of compassion which include integrative
thinking, prosocial cost-benefit analysis, and a commitment to alleviating suffering were all
instrumental in leading to the creation of a social venture between the Maasai, ADCAM, and
Pikolinos.
Integrative Thinking
The very nature of the partnership reflects integrative thinking as it involves an amalgamation
of various perspectives in addressing others’ suffering (Miller et al. 2012). Each partner offers
a key contribution to the venture that would not be possible and is driven by all three entities
being prosocially motivated.
Maasai. Although it might appear that the traditional, closed-network nature of the Maasai
community may not support an innovative problem-solving approach, the Maasai, and
particularly Kikanae, the Community Leader, were motivated and willing to integrate diverse
approaches in their efforts to address their economic challenges (De Dreu et al. 2008) and work
with ADCAM International and Pikolinos. Juan Peran Bazan (Vice President, Pikolinos)
adequately captures Kikanae’s motivation for integrative thinking with the following quote:
[Concern for the women] was the main goal for Kikanae. Kikanae is a bit of an anomaly of the
Maasai because he understood [things] differently due to his own personal experiences of
watching his mother struggle. He understood the importance of empowering women in order
to develop a community. The goal of the project is not to corrupt the culture but to help the
women since they play an important role in many parts of the community (family, children
education, etc.).
ADCAM. The worlds of fashion and social exclusion may rarely collide, yet Rosa Escandell
(Founder and President, ADCAM), created an NGO, that brought them together. She operates
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under the conviction that the textile industry can be compatible with human values and social
commitment. She elaborates:
When I decided to change my life and work in development, my thought was to go to Africa,
but I always told myself, you have to be more prepared to go there. I also knew what the Maasai
can do [beadwork]. The Maasai community is the king of the tribes. So I said, ‘maybe there’s
a commercialization opportunity with the women through their natural work (beading). If we
give them the design, we can achieve a lot together.
Pikolinos. Rosa recalls that Pikolinos was not the original organization that she approached
about the Masaai Project. The company she had approached had expressed, “I’m sorry I cannot
do the project with you, but I will introduce you to Pikolinos.” Pikolinos was progressive in
their enthusiasm to collaborate with the Maasai. Being in the fashion industry where
uniqueness and originality is lauded, Pikolinos was receptive to the Maasai project, thus
resulting in more integrative thinking about their dual objectives of enabling an indigenous
community and enhancing their brand image.
We went to Kenya and saw the impact of the shoes and realized that this could be the start of
something good...we initially had three designs, now we have about 12. This can be more than
a social collaboration. It is a way to show business people that there are many ways of
combining business and social business. –Juan Peran Bazan, Vice President, Pikolinos Group
Prosocial Cost-Benefit Analysis
Engaging in prosocial cost-benefit analysis implies that a higher value is placed on others’
outcomes than in self-interest (Goetz et al. 2010; Nussbaum, 1996, 2001).
Maasai. The Maasai community is an inherently collective society in that community members
are considerate of each other’s best interests. Liloe, Kikanae’s wife spoke about how supportive
the women are of each other in completing their beading assignments should family
commitments or other emergencies arise. Kikanae, the Community Leader, elaborates:
So we decided to give about 20% of all sales to the community account. The whole idea
was that even if one family does make a sale they still received shares from the sales
made by other community members. We used the community money for emergencies.
The Maasai community that we interviewed also discussed their willingness to include other
Maasai communities (extending into northern Tanzania) which would benefit from the
partnership in the Maasai project. Including these communities meant incurring additional
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costs such as travel, training, potential competition, other operational expenses, and overall
inconvenience.
ADCAM. We observed that the importance placed on the needs of others may motivate actions
that might otherwise be avoided due to the significant costs incurred by the actor (Miller et al.
2012). Cristina, the Program Coordinator of ADCAM-International, temporarily relocated to
ADCAM’s local chapter in Kenya and encountered the plight of the Maasai community,
reflecting:
I always questioned myself if what I am doing on the ground was making a difference
at the policy level…are things getting better for the women? Meeting Rosa helped me
understand that the work I am doing with the women on the ground matters. Life is
getting better not just for these women but even for future generations.
Rosa acknowledged that embarking on this project was not an easy task: “Even with
the beginnings of the project in Kenya, I put in my own money because you’re trying
to establish a system that you believe in, but that not everybody believes in.”
Pikolinos. Pikolinos adopted a compassionate stance towards the Masaai. They remain
very involved and committed to the project and, similarly to Rosa, they also took risks
reflecting value congruence by incurring up-front expenses in executing the project
(Kahan, 2008).
Kikanae illustrates this point:
Pikolinos pay the Maasai women even before they sell one sandal. Doing this business
is expensive. Pikolinos pay to bring the leather all the way to Maasai Mara. They pay
for all the raw material. The women bring only their labor. After all that they pay to
take the beaded leather back to Spain. You know they also pay taxes at KRA. To top it
all sometimes they do not sell all sandals. I am sure that Pikolinos does not make any
money out of these sandals. This is a social project for them. I tell you the truth if
Pikolinos today says that the business is over, I will still be very grateful for what they
have done for us. My people will still thank them for their kind heart.
Commitment to Alleviate Others’ Suffering
Nussbaum (1996) noted that compassion creates emotional ties that serve as symbols of group
membership and the emotional energy expended from being connected also reinforces
commitment.
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Maasai. One of the more notable observations from our analysis is that Kikanae, the
Community Leader, dedicated his life to ensuring that the lives of his people, especially the
women, are better off. He did so even when encountering continuous challenges, broken
promises, and opposition, all of which is evident of the compassion and commitment that he
has for the Maasai community (Thompson & Bunderson, 2003; Grant, 2007). He elaborates:
At the beginning I did not believe that ADCAM was going to help me…I immediately
forgot about the encounter. I even forgot her name. I felt that it is the same as the
thousands of promises I had received before. But I was happy…because I met them and
they were interested in my story. To me it was important to share my story and my
dreams. It made me feel alive and happy. But I did not feel that they were going to help
me. So I went back to my village.
ADCAM. Such commitment can also be seen in Cristina, ADCAM’s Program Coordinator,
who notes, “not just Maasai women but women in most poor countries suffer the most in the
society. That is why I work with mostly women.”
Pikolinos. Pikolinos integrated social responsibility into their culture and their commitment to
the Maasai project as part of their foundation for engagement with the Maasai. A young Maasai
warrior acknowledges the role that Pikolinos has played in his community when he states that,
“the Pikolinos project is the first project to change the lives of the Maasai women.”
Development of Trust between the Partners
In considering relationship-oriented indigenous communities, such as the Maasai, trust is

notably vital for successfully interacting with and operating within the community. Cognitive
trust is usually the first type of interpersonal trust to develop as it evaluates the competence
and responsibility of the trusted party (Barber, 1983; Gook & Wall, 1980; Shapiro, 1990).
Maasai and ADCAM. This Maasai community is especially sensitive to developing trust since
broken promises have repeatedly been made to them. Kikanae states,
At the beginning I did not believe that ADCAM was going to help me. I came to believe
that ADCAM could help us only after I traveled to Spain and Rosa came to live with
my people for three years.
It was not until Rosa-ADCAM lived with the Maasai, developed an understanding of their
culture and challenges, and “touched their hearts” that she was able to transition from cognitive
to affective trust.
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Maasai and Pikolinos. The relationship between the Maasai and Pikolinos was also initially
dependent on cognitive trust, particularly from the Pikolinos perspective. In spite of Pikolinos’
affinity towards assisting developing societies, they still needed to have a marketable product.
This cognitive trust ultimately transitioned to affective trust. Pikolinos trusts the Maasai women
to make design selections and they have come to rely 100% on the Maasai women to come up
with the color combinations. Juan Peran Bazan (VP of Pikolinos) elaborates:
“Earlier we had our designers come up with designs and the color combinations …this
year you can imagine how big our trust is…we did not do even one color combination.
We realized that our designers cannot come up with the kind of designs that the Maasai
women can effortlessly put forth. The women did it perfectly because it is their eyes
that are Africa.”
Rosa won the trust of the community. She lived with the Maasai for a long time. She worked
hard to earn their trust. As a company we did nothing special…we just presented ourselves as
we are…but since Rosa was trusted, we were trusted.
Pikolinos was able to earn the trust of the Maasai because they came in through the banner of
ADCAM. This attests to the importance of the brokerage-mediator role that ADCAM plays.
ADCAM and Pikolinos. Trust between these two partners remained at the cognitive level. Both
ADCAM and Pikolinos continued to operate on the basis of responsibility, integrity and
fairness with regard to the Maasai Project. We did not observe emotional investments or
affective trust as being a driver for their interaction and their effectiveness in executing the
Maasai Project.
We have discussed the critical role that cognitive trust plays in facilitating this partnership, as
well as the significance of affective trust, especially within the Maasai community. We will
now report findings from our analysis of the impact of social capital and how the partnership
entities utilized networks and brokers to develop a successful social venture.
Bridging the Gap with Social Capital
Closed Network within the Maasai Community
Our findings highlight the tightly-knit closed network of the Maasai Community. This
indigenous community is a distinct semi-nomadic ethnic group, steeped in symbolic traditions
and culturally-rich celebrations and practices. Pikolinos Vice President, Juan Peran, noted that
participating in the Maasai Project partnership would have been “tough for the Maasai” due to
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the “differences in language, culture, and pace of life.” Thus, we observed the necessity of a
broker from within such a closed network community for a partnership like this to be successful.
Kikanae amassed respect, trust and a high concentration of obligations through his commitment
to deliver on social projects such as facilitating the constructions of a water well and a school
as well as creating a micro-credit system for the women. These characteristics made him an
effective broker for his community. He was able to win the trust of the elders and build
substantial social capital with the community.
Pikolinos as an Open Network
The multinational corporation (Pikolinos) dealt with the NGO (ADCAM, International) for all
practical purposes. Pikolinos’ leadership visited the Maasai and they sent their designers and
marketing promotion team every year to work with the community. However, they relied on
ADCAM to broker the relationship. Juan Peran Bazan (VP of Pikolinos) notes:
I know Rosa as the European face and Kikanae as the Maasai leader and the face of his
people. The two work well together. We deal with ADCAM and ADCAM deals with
the Maasai.
Our designers also help with the training, ensuring quality control. Pikolinos mainly
deals with manufacturing of the final product in addition to marketing and promotion.
Pivotal role of the External and Embedded Brokerage
We now discuss the brokerage roles in bridging the open and closed networks. At the beginning,
the external broker (Rosa, President and Founder of ADCAM) was not readily accepted into
the Maasai community. It took her two years of building the relationship with the community
and it took three years before she could land a corporate client that was willing to take a chance
on the community. Rosa first built a relationship with the embedded broker (Kikanae, the
Community Leader) and later on she was able to establish a relationship with the Maasai
community based on evidence of trustworthiness.
ADCAM’s mediating role in this partnership was vital to the collaboration’s development.
Although Kikanae can be viewed as a member of the indigenous community who initiated the
collaborative partnership by reaching out to ADCAM, ADCAM is credited with driving the
partnership by making connections through its networks. Juan Peran (Pikolinos Vice President)
pointed to the role of the brokers:
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Rosa and Kikanae handle all the import of raw materials and the export of semi-finished
material…at the beginning, the process sounded complicated. It is now familiar…not easier
but familiar as we have a custom agent, Kikanae and Rosa who deal with that.
Evidently, it took ADCAM’s connection with corporate Europe (weak ties) as well as the years
of building relationships with the Maasai community (strong ties) to bridge the divide between
the two vastly diverse entities (structural holes). Moreover, ADCAM’s initial access to the
Maasai community would have not been possible without a connection through an insider (the
embedded broker). The Maasai community is a guarded and closed community and it took
Kikanae, a community leader and a trusted member, to gain initial access. The Maasai
Community, ADCAM, and Pikolinos would all agree on the significance of the brokerage role.
DISCUSSION
This paper centers on the intersection of compassion, trust, and social capital in creating a
sustainable international venture. Our case analysis offers several contributions to the literature.
To our knowledge, this is the only study operationalizing the theoretical compassion
framework suggested by Miller et al. (2012). We agree that compassion as a prosocial
motivator can influence social venture creation through integrative thinking, prosocial cost
benefit analysis, and commitment to alleviation of suffering. Recent theorization in social
entrepreneurship suggests that entrepreneurs pursuing social ventures possess a configuration
of motivations, cognitions, and capital that facilitate the entrepreneurial agency required to take
part in the process (Grimes et al. 2013). Our study shows that compassion as a prosocial
motivator propels Maasai, ADCAM and Pikolinos to invest resources (talent, money, time etc.)
towards the creation and sustainability of the venture.
Our second contribution is to illuminate the role of trust in the collaboration. We argue that
trust is a necessity in international exchange-oriented relationships and that the organizational
context helps to frame the individual context (Ammetera et al. 2004; Ferrin, Dirks, & Shah,
2006). From the context of our study, trust involved not only emotional aspects but legitimacy
and institutional elements as well (Lewicki 1998; Kramer, 1999). Among the Maasai, trust is
sacred, their verbal contracts are binding and are enforced by the elders of the community who
are highly respected (Grandin, 1991). Trust provided the collaborating partners with a
competitive advantage through building beneficial relationships where all parties collaborated
for the benefit of one another (Madhok, 2006; Zaheer, McEvily, & Perrone, 1998). The
cognitive and affective components of trust were evident as the partnership evolved.
ADCAM’s reliability and dependability was necessary for cognitive trust to develop (Zucker,
1986). The Maasai also had to prove that they were competent and reliable, which formulated
trust for ADCAM and Pikolinos (Butler, 1991; Cook & Wall, 1980). We also observed that
Pikolinos was able to transition directly to affective trust via ADCAM.
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Our third contribution was the evidence of social capital that amalgamated through brokerage
in the relationship between Maasai, ADCAM and Pikolinos. Facilitating a transnational social
enterprise requires building social capital, both within an indigenous community and with the
external international entities. This is particularly essential when working with two vastly
different cultural landscapes where complexities are numerous, such as understanding the
relevant constraints embedded in cultural norms and practices. ADCAM spent three years
learning the language, culture, and developing sufficient trust to operate in an effective way.
For-profit firms rarely have the patience to engage in such long-term investment strategies,
thus highlighting the role of compassion as ADCAM became the ‘accidental’ mediator,
bridging the cultural divide, reflecting their own sense of mission. The resulting outcome – a
new form of social capital available to the community – provided an enduring resource, a
product of considerable patient negotiation, discussion, and cultural exchange. Kikanae’s role
as a broker from the Maasai community was also instrumental in the creation of the
international social venture. The outcome from Rosa’s and Kikanae’s bridging roles was a new
form of social capital that ventured outside of the Maasai community network linking the very
different habitus of the Maasai with Pikolinos.
Finally our study expands the domain of compassion beyond its traditional focus on individual
and organizational processes to include international social venture formation. We showed how
an indigenous community in subsistence markets can negotiate and become a legitimate actor
in formal institution markets using compassion, trust, and social capital. Markets and their
supporting institutions are established through rules that define who have access versus who
does not (Fligstein, 2001). We sought to show that disparate groups can (re)negotiate existing
social orders and seek access to markets in a way that respects their culture and traditions. Our
analysis also reveals how purposeful effort by an indigenous community can define and shape
international social collaboration. Our findings affirm other entrepreneurship studies that have
posited that compassion or other cognitive-based strategies can be used to persuade and
influence those who guard the status quo (Aldrich & Fiol, 1994).
Limitations and Conclusions
In much management research, we lopsidedly focus on the maleficence of human beings and
institutions as opposed to the goodness they are capable of doing (Cameron et al. 2003;
Cameron & Caza, 2004). This study investigated the formation of an international social
venture by the Maasai, ADCAM, and Pikolinos. We do not suggest or claim that our findings
represent the only way to build sustainable international ventures which champion the
indigenous community. Our intention was to illustrate how compassion is important in the
formation of international social organizations. The choice of setting and the uniqueness of the
partnering organizations in this case restrict the generalizability and transferability of its
findings.
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While the roles of trust and social capital have been previously studied in internationalization
research (Parkhe, 1998; Brenkert, 1998; Aulakh, Kotabe, & Sahay, 1996), we believe the
confluence of compassion and brokerage, applied to two very disparate communities, provides
guidance for other scholars interested in examining partnerships between international firms
and indigenous communities.
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Sustainable Entrepreneurship: Positive Change Agents
at the Base of the Pyramid (BOP)
Norma Juma, Washburn University, USA. Norma.juma@washburn.edu
Hellen Nyolo Otieno Strathmore University, Kenya. hotieno@strathmore.edu
Jennifer M. Sequeira, University of Southern Mississippi, USA. jennifer.sequeira@usm.edu
Abstract
In this paper we adopt Dean and McMullen’s (2007) framework to examine environmentally
relevant market failures that may represent opportunities for simultaneously achieving
profitability while reducing environmentally degrading economic behaviors at the Base of the
Pyramid (BOP). We will also examine how ecopreneurs at the BOP create economically viable
businesses while remaining focused on their core environmental and social values given
scarcity of resources at the BOP. We are particularly interested in studying ecopreneurship at
the BOP because 42 percent of Kenyans live below the poverty line (UNICEF, 2016) due to
lack of off-farm employment opportunities and low returns from their small and often
unproductive farms. Environmental entrepreneurial (or ecopreneurial) small and medium
enterprises (SMEs) have been found to look to other goals in conjunction with financial ones
and are often prepared to go to significant lengths to achieve such goals (Rodgers, 2010:125).
Dean and McMullen (2007) view environmental entrepreneurship (ecopreneurship) as a subset
of the broader concept of sustainable entrepreneurship, with a focus on resolving market
failures which result in environmental degradation. Schaltegger (2002: 47) defined
ecopreneurship as “entrepreneurship through an environmental lens”.
Introduction
Kenya faces environmental degradation due to a number of factors such as water and air
pollution, deforestation and land fragmentation. Kenya has an area of about 582,646 sq.km
(224,962 sq. miles) of which 2.2 percent is comprised of water surface. Approximately 16-20
percent of the land area is classified as medium to high potential agricultural land (arable land)
which is occupied by roughly 80 percent of the population (Kiprop, Bett, Mshenga & Nyairo,
2015). With a population of 44.86 million and an average population growth of 2.7 percent per
year (World Bank, 2014) the impact of land fragmentation cannot be overestimated. Land
ownership in Kenya has passed on from generation to generation leading to smaller plots with
each subsequent generation. Having large families has led to land being subdivided into
fragments that are not viable for subsistence farming let alone commercial framing. Agriculture
remains the mainstay of the Kenyan economy, contributing 25% of GDP. However, land
fragmentation is a major hindrance as it restricts agricultural development, reduces productivity
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and opportunities for rural development. In order for Kenya to sustain its economic
development and the livelihood of its citizens it must examine how it can claim the 80 percent
of its land that is classified as Arid and Semi-Arid Lands (ASALs) and how it can increase
productivity in the arable land in spite of high fragmentation. Government policies and market
mechanisms in the past have failed to deliver on these two key issues. Moreover, extant
research demonstrates that environmental degradation results from the failure of government
policies and market mechanisms (Common, 1996). Some scholars have argued that economic
system deter entrepreneurs from undertaking environmental problems and often motivate
environmentally degrading entrepreneurial behaviors (Bator, 1958; Cropper and Oates, 1992;
Pigou, 2013; Tietenberg, 2000). Entrepreneurship literature concludes that ecopreneurial
opportunities arise from inherent failures of government policies and market mechanisms
(Anderson and Leal, 2000, 2001; Buchanan and Faith, 1981; Coase, 1974; Demsetz, 1970;
North and Thomas, 1970).
The study will examine environmentally relevant market failures that may represent
opportunities for simultaneously achieving profitability while reducing environmentally
degrading economic behaviors at the BOP. Secondly, it will examine how ecopreneurs at the
BOP create economically viable businesses while remaining focused on their core
environmental and social values. We have formulated three research questions to achieve these
objectives:
Research questions
1. What factors motivate sustainable entrepreneurship / ecopreneurship at the BOP?
2. What government policies or market mechanisms promote/deter sustainable

entrepreneurship/ ecopreneurship at BOP? (Key challenges)
3. How do ecopreneurial small and medium enterprises (SMEs) maintain economic

viability?
Research Methodology
This research will utilize a qualitative case study design (Miles & Huberman, 1994).
Researchers have identified the case study approach as being the most appropriate method for
exploring or discovering a new area (Miles & Huberman, 1994), which is applicable to this
study.
We will use triangulation to increase the robustness of the research - we will collect data using
semi-structured interviews, micro-ethnography and document analysis (Eisenhardt, 1989).
Some of our target firms have won numerous awards and their business models are well
documented in the business press and academic journals. We will use semi-structured
interviews to allow us to access the data most important to each firm/ entrepreneur (Bryman,
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2013). The proposed interview questions along with their links to the basic research questions
are given below. We will use micro-ethnography through participant observation among the
target sample, within a specific time period, in order to witness the organizations’ cultures and
actual operations (Bryman, 2004; Dixon and Clifford, 2007).
Target sample
We will conduct in-depth case studies involving social enterprises in Kenya who are engaged
in the production and distribution of low tech clean energy to a whole cottage industry that is
emerging from various uses of water hyacinth. Water hyacinth, an invasive plant, was once a
menace that threatened fishing activities in Lake Victoria. This lake is a sole source of
livelihood for a majority of the people who live around the lake. We have identified a few
ecopreneurial SMEs: 1) GreenChar (produces and distributes charcoal briquettes); 2) A sole
ecopreneur in Machakos county who drills water wells in semi-arid lands in attempt to make
them arable; 3) local farmers in the Lake Victoria region who use water hyacinth for livestock
feed; 4) SMEs who make handicrafts from water hyacinth; 5) a local entrepreneur who uses
recycled paper and stems from water hyacinth for paper production; 6) Hyaquip, an American
company which manufactures organic fertilizer using water hyacinth and 7) local SMEs who
manufacture furniture using water hyacinth.
All target sample are for profit firms that are engaged primarily in delivering goods and services
to the economically disfranchised individuals as well as mainstream markets while at the same
time being environmentally conscious. For instance, GreenChar’s charcoal briquettes are made
from agricultural waste. These charcoal briquettes are affordable, virtually smoke free, higher
energy, and longer lasting than conventional wood charcoal and firewood. Recycling
agricultural waste into charcoal briquettes limits local deforestation. Given that more than 80%
of Kenyan households use conventional wood charcoal and firewood as the primary source of
cooking fuel this has a huge impact on the environment and health of the citizens.
Analysis
Notes taken during through interviews, observation and reflection will be typed up after each
site visit unless captured in video recordings. Where possible data collection and analysis will
be done concurrently, this process will not only speed up the analysis but will also allow
emerging themes to be more thoroughly investigated while we are still in the field (Eisenhardt,
1989). Throughout this process we will maintain meticulous memos which will facilitate the
coding process (Miles and Huberman, 1994). The coding system will tightly couple the data
from all sources to the research questions (see table 1) in order to secure fit with the aim of our
study and the findings of the literature review. This will allow us to maintain a scrupulous chain
of evidence (Dixon and Clifford, 2007). We will use the qualitative analysis software NVivo
10.0 to conduct our analysis.
References Available Upon Request

93
The Impact on Livelihoods of the Income Earned
by Women Hairstylists in Tanzania
Wineaster Anderson3 and Immakulata Komba2

Department of Marketing, University of Dar es Salaam, Tanzania
Abstract
This study estimates the impact on livelihoods of the income earned by crafty women -
hairstylists. Specifically, the average daily earnings of a woman engaged full time in hairstyling
was measured, the uses of the earnings from hairstyling were traced in order to measure their
impact on poverty alleviation and the challenges faced by hairstylists were identified. A cross-
sectional survey based on the descriptive approach was conducted on 230 women hairstylists
in the city of Dar es Salaam, Tanzania. The absolute definition of poverty based on
income/consumption in relation to specific nationally and internationally defined living
standards was adopted to compare the income/consumption of the study group. The results
revealed that a woman engaged full time in hairstyling in the city earns more than a household
with the nationally defined per capita income and the international indicator of poverty. These
earnings have enabled them to acquire extra assets, to expand their business and to save.
However, in most cases, these women are unable to obtain a loan, as they are not recognized
by financial institutions due to the likely instability of their business and labor mobility. They
also lack business skills to grow their enterprises. An abundance of literature exists on poverty
alleviation but there are not many studies linking the impact on livelihoods of specific sectors
and gender in the context of a developing country. This study seeks to fill the existing gap in
the hairstyling business. It is essential for various stakeholders to be enlightened on the value
of such sectors regarded as of low economic value such as hairstyling.
KEYWORDS hairstyling, crafty women, livelihood, poverty alleviation, Tanzania
3
Correspondent: Professor Anderson (PhD) is based in the Department of Marketing, University of Dar es
Salaam, P.O.Box 35046, Dar es Salaam, Tanzania; E-mail: wineaster@udbs.udsm.ac.tz; Fax: +255 22 2410714;
Telephone: +255 688 387250. Ms. Komba is former MBA Student at the Department of Marketing, University of
Dar es Salaam
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INTRODUCTION
An abundance of literature exists on poverty alleviation (e.g., Shirima, 2004; Mnenwa & Maliti,
2008) but there are not many studies linking the impact on livelihoods of specific sectors and
gender in the context of a developing country (Anderson & Saidi, 2011). Women’s role in
alleviating poverty through micro, small and medium businesses has been recognized
(Anderson, 2012; Premchander, 2003) as women constitute the majority of the informal
workforce in most developing countries, occupying what Horn (2010) refer to as the lion’s
share of vulnerable ranks. Globally, fewer women than men are employed in the formal sector
(Horn, 2010). According to Joffe and Jacklin (2003), women are not employed due to their
poor work performance, which is caused by, among other factors, the double burden of paid
and unpaid work at home. Although women are actively involved in economic activities for
survival, bearing and rearing children remain their prime responsibility, and thus they end up
playing a major role in both production and reproduction (Nandal, 2006). Their share of the
labour force remains at around 35%, with men continuing to dominate the labour market
(United Nations Population Fund - UNFPA, 2013).
In that context, most women in developing nations end up in the SME sector for survival, which
is seen as a meaningful means of creating employment opportunities, especially for women
and the poor, who are on the margins of the economy. Unemployment and failed development
initiatives, particularly in Africa, have increased the importance of SMEs’ development (Joffe
& Jacklin, 2003). Since SMEs tend to be labour-intensive, they create employment with a
relatively low level of investment per job created (Anderson and Mzee, 2013). In Africa, the
sector plays an important role in creating jobs and the trickle-down effect has an impact on
their activities whereby around 61 percent of the labour force outside agriculture is employed
in SMEs (ILO, 2013). The SME sector in Zambia, for instance, employs nearly 55 percent of
the working population (Richardson et al. 2004). According to Vala (2009), in Mozambique,
98.6 percent of enterprises fall in the segment of smaller enterprises and employ 46.9 percent
of the country’s workforce. In Tanzania, the sector employs between 3 and 4 million people,
accounting for 20 to 30 percent of the total labour force and contributing between 35 to 45
percent of the country’s gross domestic product (University of Dar es Salaam Entrepreneurship
Centre, 2002; Anderson, 2011). In the light of these facts, the importance of the SME sector
for livelihoods and poverty alleviation in developing economies is undeniable, which is the
reason for this research.
Poverty alleviation requires processes that help people improve their capabilities and
functioning, which enable them to take charge of their affairs instead of being supplicants
before higher authorities. A new approach views poverty not only as lack of income, education
and health facilities, but also as the lack of a voice, empowerment, good governance and
security against shocks (Chambers, 2006). People who have survived by trying to solve the
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problem in difficult economic and political conditions have considerable capacity to put their
experience and skills to work, once they are empowered. Ñopo and Gonzales (2008) argued
that there is a combination of individual characteristics for which it is possible to find males in
the labour force but not females. Likewise, there is also a combination of individual
characteristics for which it is possible to find females, but not males. For example, most
Tanzanian working women who work for wages are found in low-paid, unskilled and often
temporary jobs in the unorganized and informal sector. The vast majority of women who are
self-employed are engaged in food processing, food vending and making handcrafts, such as
baskets, candles and traditional decorations, as well as in hairstyling (Ellis et al. 2007). The
population of mainland Tanzania was estimated to be 44.5 million in 2012 (URT, 2012).
Females represent slightly over 50 percent of the total population.
Tanzania has in place legal, policy and institutional frameworks which intend, among other
things, to empower women. The existing frameworks include the Tanzania Development
Vision 2025, which stipulates the intention to promote gender equality and the empowerment
of women in all socio-economic and political relations and cultures with the aim of achieving
high quality livelihoods for its people; the National Strategy for Growth and Reduction of
Poverty 2010/11 - 2014/2015 (MKUKUTA) which aims to improve survival rates, health,
nutrition and wellbeing, especially of children, adolescent girls, women and other vulnerable
groups; the National Women and Gender Development Policy 2000, and the associated
National Strategy for Gender Development (2005) which aim to promote gender equality and
women’s empowerment and supports their full participation in social, economic and political
life. Even with the existence of these frameworks, much still needs to be done to address
women’s development challenges. According to Tibandebage and Kida (2011), women in
Tanzania remain disadvantaged in all spheres of life despite the fact that they constitute the
majority of the total population. Women are disadvantaged in terms of control and decision
making over resources, employment opportunities and access to education in the country. Very
few women are employed in skilled and professional jobs (United Republic of Tanzania,
2010a/2010b).
The URT Ministry of Industry and Trade (2003) in its SME Development Policy stipulates that
men and women stand on uneven ground and it emphasizes the need for specific measures for
promoting women’s entrepreneurship. Economic hardship has increasingly forced more
women to engage in income-generating activities in the informal sector, which to a large extent
has been more of a survival strategy to supplement family income, primarily for consumption
purposes. According to Mascarenhas and Mbilinyi (1983), there has been a rapid increase in
the number of rural women migrating to urban areas to seek employment and education. The
ones choosing to engage in income-generating activities mostly opt for those that require
minimum start-up capital and low level of education, such as food vending and hairstyling.
Hairstyling as an income-generating activity in Tanzania, started long ago, and it is increasingly
96
becoming a source of income for the vast majority, particularly in urban areas (Tripp, 1996).
Information on the impact of such a business on poverty alleviation is still lacking, with limited
empirical evidence of its contribution to livelihoods, living standards and the welfare of women
and their families. That information gap triggered this study.
This study therefore estimates the impact of women’s income from hairstyling on their
livelihoods. More specifically, the study estimates the average daily earnings of a women
engaged full time in hairstyling, traces the uses of the income earned from hairstyling to
alleviate poverty in terms of their accessibility to basic needs and social services such as food,
housing, education, health and water and assets ownership, and identifies the challenges
existing in the hairstyling business. The study seeks to fill the existing gap in the hairstyling
business and to improve the lives of women and their dependants. It is also essential for various
stakeholders to be enlightened on the value of sectors considered of low economic value such
as hairstyling. To fulfil these objectives, a literature review is conducted before presenting the
methodology, the findings and finally the conclusion.
LITERATURE REVIEW
Concept of Poverty Alleviation
Poverty has been described in many different ways in the literature. The term ‘poverty’ has
been defined as a situation in which an individual is placed below an acceptable minimum
standard of wellbeing and it is usually manifested by well recognized indicators such as hunger,
sickness, lack of information, powerlessness and marginalization. Having an income and other
economic assets is essential for meeting basic needs (Ludi and Bird, 2007; Mascarenhas, 2007).
Reed (2001) defines poverty as “a social relationship of competition among individuals, social
groups and the state in their pursuit of wealth and political power. Poverty results from the
competitive relationship in which a significant number of people are unable to gain access to
life-supporting assets, be they productive, environmental or cultural, while others secure the
conditions for stable, productive lives” (Anderson & Saidi, 2011:21).
Some scholars (such as Chambers, 2006) have categorized the definitions of poverty into five
groups, namely, income poverty (or its common proxy, consumption poverty); material lack or
want: besides income, this includes the absence of, limited or low quality assets (such as shelter,
clothing, furniture, personal means of transport, radio, etc.) It also includes inadequate access
to services; capability deprivation, referring to what we can or cannot do, or can or cannot be.
This goes well beyond material lack or want to include human capabilities, such as skills and
physical abilities, and also self-respect in society; multidimensional deprivation, with material
lack or want as only one of several mutually reinforcing dimensions; and the multiplicity of
the meanings of poverty identified by the poor themselves.
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The monetary approach to measuring poverty is the one most commonly used. It uses
calculations of household income (including own production and per capita expenditure) to
identify a shortfall in consumption (or income) from a specified poverty line. In 1990, the
poverty line for developing countries was set by the World Bank at a per capita income of
US$370, the ‘dollar-a-day’ poverty line. However, the World Bank recognizes that what is
necessary to satisfy basic needs varies across time and place. Therefore, poverty lines vary,
with each country usually calculating two or more poverty lines (Ludi & Bird, 2007). For
Mainland Tanzania, the basic needs poverty line was set at TShs 13,998 per person per 28 days
in 2007 and the food poverty line was calculated to be 10,219 TShs per month per adult in 2007
(HBS 2007). The National Poverty Line is the minimum amount of money which is thought
necessary for a person to meet at least his or her basic needs in the country. This study therefore
uses the absolute definition of poverty which is based on income/consumption in relation to
specific nationally and internationally defined living standards or indicators.
Gender and poverty alleviation
Gender as a social construct, rather than a biological category, allows poverty alleviation
projects to focus on different engendered social, economic and political contexts. Gender
relations vary in different historical and socio-economic contexts. Men and women in many
societies are given different roles, activities, responsibilities and authority. The result has been
the gendered division of labour and gendered access to resources such as land and education
(Lorber and Farrel, 1991). These differences account for a considerable variation in the nature,
scope and magnitude of women’s business activities. Poor uneducated women, for example,
are mainly found in the informal sector operating small eating places (food vendors) unlike the
richer, more educated women with more capital who usually run relatively large enterprises,
employing more people and using more appropriate technology (Olomi, 2009).
However, there are various sectors of the economy in which the two genders are engaged, such
as handicrafts, in most developing economies. In Namibia and Ethiopia, for example, making
pots and furniture from wood appears to be the domain of men, while making pots and weaving
mats and baskets, for example, using palm leaves and grass, is carried out almost exclusively
by women (Suich and Murphy, 2002). The income from these crafts is used to improve access
to resources such as food, credit, healthcare and education and to invest (Suich and Murphy,
2002). Therefore the motives for starting and running such businesses vary and have been
categorized in Nchimbi (2002) into push and pull factors (see Table 1).
Table 1 Push and pull factors for running small businesses
Push factors Pull Factors
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To meet basic economic needs, either To have something she can have control over
because the woman is single and has no
formal employment or the spouse’s income, To raise her social status and earn the respect
or her own, is inadequate to meet basic of her husband and the community
family needs.
To have greater flexibility (compared with
Creating a breathing space for a woman. employment) to combine work with her
Staying around the home all day long invites household responsibilities
quarrels with neighbours and family
members. To be able to access credit offered by some
donor-supported projects.
Frustration and boredom in their previous
jobs. Need for achievement
As an escape from workplace discrimination Need for independence

and domination of male employers
Need for money as a measure of success
As a solution for women who find
themselves ‘trapped’ at home once their
children have grown up
The Integrated Labour Force Survey (2006) points out the reasons for women engaging in the
informal sector, such as they cannot find other work, family needs, they need additional income,
the business provides a good income, the business does not require much capital, they can
combine business and household responsibilities, they want to be independent, they have been
released from other employment/working time has been reduced, they can choose their hours
and place of work and traditional line of business. Women engaging in the hairstyling business
require various inputs such as materials, labour, capital, hairstyling skills, time and
premises/frames to rent and entrepreneurial skills, but once established their earnings and
profits increase. The level of efficiency and effectiveness in the use of inputs and the creativity
of the hair braider to design appealing styles attract more customers and improve the returns,
which eventually leads to increased employment, improved earnings, good wages and more
profit (Suich & Murphy, 2002). The income generated from the business enables the women
and their families to access the basic needs of food, shelter/accommodation and clothes, social
services, such as health, education, water and electricity, and to purchase basic and potential
assets which lead to women’s improved living standards and livelihoods.
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To this end, this study seeks to respond on three main research questions: What is the average
daily earnings of a women engaged full time in hairstyling?; how the income earned from
hairstyling is used to alleviate poverty in terms of their accessibility to basic needs and social
services such as food, housing, education, health and water and assets ownership? Or what
proportion of income is spent on each item? What are the challenges existing in the hairstyling
business in Tanzania? The methods used for data collection and analysis are presented in the
next section.
RESEARCH METHODOLOGY
A cross-sectional survey based on the descriptive approach was conducted in the City of Dar
es Salaam in five wards (i.e., Kijitonyama, Kinondoni, Mbezi, Mwenge and Manzese). The
cross-sectional survey is suitable when the individual(s) studied forms a unit of analysis and
can be used as a vehicle in measuring individual altitudes, characteristics and relationship
between such characteristics (Oppenheim, 1992). Usually, it deals with the situation existing
during a given period in a group or population (Babbie, 1995). Hence, in each ward, a smaller
administrative unit was selected. Dar es Salaam is the country’s leading commercial city and
is one of the fastest growing cities in Africa due to the rural-urban migration of those seeking
a better life. Hairstyling for cash happens more in Dar es Salaam than in other regions of
Tanzania.
Dar es Salaam is a home to at least 800 registered hair crafty enterprises, which employ an
average of 8 hairstylists per enterprise (Tanza YP, 2009-2016). The data and figures from local
government administrative streets [in Kinondoni, Ilala and Temeke Municipal Councils] show
that there are around 122 hairstyling salons in the study area, with 20 in Mwenge Nzasa, 20 in
Kijitonyama Bwawani, 29 in Kinondoni mjini, 30 in Mbezi Luis, 13 in Manzese Madizini and
10 in Manzese Mvuleni. Simple random sampling based on the concentration of hairstyling
salons was employed. According to Olken and Rotem (1986), a simple random sampling is
used in those occasions when using the entire population is not necessary and is considered too
expensive in terms of response time and scarce resources. Consequently, survey was conducted
on 230 women engaged in the hairstyling business in the local government administrative units
of Mwenge Nzasa (44.8%), Kinondoni Mjini (14.3%), Kijitonyama Bwawani (18.3%), Mbezi
Luis (6.5%) and Manzese Midizini and Mvuleni (16.1%).
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Figure 1 Map of the Study Area
Source: Adapted from Dar es Salaam City Profile 2004
A self-administered questionnaire was given to the respondents, which enabled them to get
enough time and freedom to respond on the given questions as recommended in Saunders
(2009). Thus, the majority of respondents were drawn from Mwenge Nzasa because it has more
women engaged in the business than other areas. The presence of many operators in Mwenge
Nzasa is a result of the concentration of many residents and the high price charged per customer.
This was witnessed by one operator who said that “Mwenge Nzasa pays”. Mwenge is the site
of a major bus terminal and so it has a busy market with innumerable shops. Most women
engaged in the hairstyling business are either employed by business owners or work using the
business’s facilities and pay the owners on a daily basis. The surveyed sample included women
from both licensed and unlicensed hairstyling salons. The sample of questions is summarized
in Table 2.
Table 2 Sample of questions
Variables with respect to study Indicators

objectives
Respondents and business Place of the business, age, marital status, education of respondents;
characteristics number of dependants, number of years in business, business
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ownership, other sources of income and assets bought as a result of
their earnings
Business income Number of customers served per day, the price they charge, daily
earnings when business is good and bad, daily costs of the business
and number of work days per week, average daily earnings from the
business
Allocation of earned income Expenditure on shelter, food and social needs; their monthly income
before they started the hairstyling business and the use of that
income
Opportunities, challenges and Types of opportunities and challenges; measures to address the
measures to address challenges
challenges
Data analysis employed the Statistical Package for Social Sciences (SPSS Version 20) to run
the frequencies, means, cross-tabulations and standard deviations. Chi-square was used to test
if there were statistically significant differences in the contribution of women’s earnings to
household expenditure, and the contribution of women’s earnings to meeting various basic
needs such as education, clothing and shelter, and to investment and savings. The study,
therefore, tests for the equality of the mean daily expenditure per person on basic needs that
the null hypothesis which is H0: µ1=µ2=µ3=µ4 against the alternative hypothesis that means
are not equal.
The absolute definition of poverty, which is based on income (or consumption) in relation to a
specific living standard or basic need, was adopted. That is, a person is considered poor if his
or her consumption or income level falls below the level necessary to meet basic needs in both
a national and international context (Ludi and Bird, 2007). The monetary approach to
measuring poverty was used to calculate household income (including own production and per
capita expenditure) and to identify the shortfall in consumption (or income) from a specified
poverty line. For Tanzania, the basic needs poverty line was set at Tshs 13,998 per person per
28 days and the food poverty line was calculated to be 10,219 TShs per month per adult in
2007 (based on HBS 2007). Thus women’s earnings and expenditure in the current study were
compared with these poverty measures.
FINDINGS
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Respondents’ Characteristics
Table 3 presents a summary of the respondents’ characteristics. Young people are the main
owners and operators of the businesses, while very few indicated they were over 50 years old,
possibly due to the nature of the business which requires a lot of concentration and standing
for a long time during their work, as reported by some respondents. The findings also reveal
that the majority of women engaged in the business are single. This was also supported by the
women’s response in the qualitative part of the research as they responded that they are
perceived to be prostitutes, and so the majority is unmarried because when they get married
they are commanded to stop the business by their husband. The study findings indicate that
66.7% of women were divorced, 50% were separated and 46.8% were single. This is in line
with the interview conducted by the GGA team with Tanzanian women entrepreneurs in
September and November 2006, which reinforced the presence of culturally based obstacles to
women’s economic empowerment. The reluctance of husbands to allow their wives to engage
in business activities, and time constraints due to competing domestic responsibilities were
never far from the surface (GGA 2006). Cultural barriers also negatively impacted their access
to finance, as well as their ability to attend training courses and to access business development
policies.
Table 3 Selected characteristics of respondents
Characteristics n = 230
Location
Mwenge Nzasa 44.8
Kijitonyama Bwawani 18.3
Kinondoni mjini 14.3
Mbezi Luis 6.5
Manzese Madizini and Mvuleni 16.1
Age category
<20yrs 8.7
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21-30yrs 50.0
31-40yrs 34.8
Above 40yrs 5.2
Marital Status
Single 43.9
Married 34.3
Divorced and/or separated 17.4
Widow 3.5
Education level
None 4.3
Primary 61.3
O-level 25.7
A-Level 3.5
Certificate 3.5
Number of dependants
None 8.7
1-3 53.9
Over 3 37.4
However, further analysis of the contribution of earned income to household expenditure

indicates that married women who are also engaged in the business play a major role in
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providing income for their families. Most women engaged in the business have completed
primary education as the highest level. This suggests that the majority of women are engaged
in the hairstyling business as a result of failing to continue with secondary or tertiary levels of
education. This is in line with Stevenson and St-Onge (2005) and Cloutier (2006), who found
that because women are seriously encumbered by their low level of education they are unable
to find employment in the formal sector, and are the first to lose their jobs when retrenchment
happens. Of necessity, they are driven into entrepreneurial activities, mainly micro, small and
medium enterprises (Olomi, 2009; Anderson, 2012). The result reveals that the income earned
by women engaged in the business not only meets their own needs but also the needs of their
dependants. Overwhelmingly, 72.2% of the respondents indicated that the business was the
only source of income. Therefore this should not be ignored by stakeholders working to fight
poverty in Tanzania. This is consistent with the findings of the Household Budget Survey
(2007), which revealed that wages and income from self-employment are the most important
sources of income in urban areas, particularly in Dar es Salaam, with the average share of
household income from self-employment having risen to around 30 percent (from 2001 to
2007) in Tanzania.
Daily Earnings of Women Engaged Full Time in the Hairstyling Business
In order to estimate the average daily earnings of women engaged full time in the business, the
respondents were asked what their average earnings per day were during the high season or the
day with the highest earnings and during the low season or the day with the lowest earning
after covering all business-related costs. The costs include frame rent, employees’ wages,
electricity and other utilities. To compute the daily income of individual members of the family
and ultimately the monthly per capita income, the daily earning were divided by number of
dependants (see Table 4). The respondents indicated that on average they worked 6 days a
week. This means that on average they work one more day than government and some private
sector employees. Moreover, the results indicate that the average number of years in business
is 6 and the average number of customers they serve in a day is also 6. The average number of
customers they serve per day was 9 for business owners and 4 for non-business owners. This
was due to the fact that in hairstyling, as in any other service industry, it is the name of the
service provider which attracts customers.
Table 4 Earnings-related information (in TShs)
Item N Mean Std. Deviation
Number of years in business 223 6.47 5.587
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Number of customers served in a day 201 6.46 9.285
Earnings per day - when business is good 218 56,411.01 61,623.72
Earnings per day - when business is bad 182 19,218.13 22,955.41
Number of days working in a week 191 6.08 .879
Number of customers served in a day for business 78 9.71 13.457

owners
Number of customers served in a day for non-business 122 4.41 4.022

owners
Individual Household Daily Income 166 30,176.57 51,137.30
2012 Exchange rate US$ 1 ≈ 1,580 TShs
How the income earned from hairstyling is used to alleviate poverty
Generally, the finding suggests that the hairstyling business makes a great contribution to
fighting poverty in Tanzania through meeting various needs which could improve living
standards. Women use the income earned from the business to buy both basic and luxury goods
and food, to invest in assets to grow their business and meet social needs, including education,
water, transport, electricity and others (see Table 5).
Table 5 Daily expenditure per person on basic needs (in TShs)
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Std.
Mean Deviation
Housing 2,367.62 3,233.11
Clothing 2,309.34 3,214.78
Food 8,393.91 5,226.30
Health services 1,323.25 2,031.89
Other basic needs 16,145.4

9,037.39
7
Overall daily expenditure 5,725.95 5,683.19
The study results summarized in Table 6 show that the mean per capita consumption for 28
days of the family members of women engaged in the business is 9 times more than to the mean
per capita consumption of 20,240 in urban population and 4 times the mean per capita
consumption of 42,858 in Dar es Salaam (HBS 2007).
Table 6 Household expenditure on basic and social needs (‘000)
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Expenditure item N Mean Std. Deviation
Total amount spent on essential services (education, health,

215 252.32 676.89
water, electricity, transport, others) in a month
Total Household Expenditure in a month (Basic + Essential

224 551.45 750.55
services)
Total Household Expenditure in a day (Basic + Essential

225 18.48 25.011
services)
Amount of money used to purchase food monthly 197 251.82 156.79
Total amount used for education yearly 139 1,032.07 2,100.53
Total amount used for transport in a month 97 86.69 156.26
education in a month 139 86.01 175.04
Food per day (household) 197 8.41 5.23
Housing/renting in a month 157 71.03 96.99
purchase clothes per month 141 69.28 96.44
Fees for nursery education per year 8 417.13 452.66
primary education in a year 105 255.80 421.60
O level secondary education per year 54 1,174.40 1,597.91
A level secondary education per year 13 1,782.46 1,216.88
college per year 24 990.92 1,151.82
university per year 5 578.00 458.50
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Health in a month 121 39.71 60.96.
Water daily 192 1.88 1.61
Electricity at home, monthly 156 13.80 10.58
transport daily 97 2.88 5.21
purchase candles and other things in a month 13 22.15 11.70
Average daily expenditure per individual member of

207 6,828.76 9,280.21
household
Education is one of the key social indicators that can be used to supplement monetary measures
of economic welfare. The study findings indicate that the respondents spent up to Tshs. 596,982
on education in a year. This again indicates that they contribute greatly to meeting the
educational needs of the family. The education gained by family members, including children,
broadens their skills and knowledge, enables them to meet life’s challenges, improve their
standard of living and eventually to reduce poverty. The contribution of women to meeting the
educational expenses of their family is in line with the Household Budget Survey (2007, HBS),
which stated that while economic hardship has increasingly forced more women to engage in
income-generating activities in the informal sector, to a large extent it has been more of a
survival strategy to supplement family income, primarily for consumption purposes –
education, health, food, shelter and clothes.
Overwhelmingly, all categories of women (divorced, widow, separated, married, single)

contribute to household expenditure through the income earned from the hairstyling business.
These results suggest that women make a great contribution and play a major role in meeting
the needs of their families possibly due to fact that many family responsibilities are left to them.
Thus the businesses have been very useful for meeting the needs of their household. These
results are consistent with Nandal (2006), who stated that women workers have a very tough
life, due to the fact that, in spite of being actively involved in economic activities for survival,
bearing and rearing children remain their prime responsibility, and thus they end up playing
important roles in both production and reproduction.
Apart from meeting both basic and social needs, many respondents have managed to purchase
basic assets needed for their households, including communication facilities such as televisions
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and radios, and furniture such as three-piece suites, wardrobes, tables and chairs, beds and
mattresses (see Table 7). The majority has purchased communication facilities to enable them
to acquire information on what is transpiring in their own country and the world as it has been
said that “information is power”. Having good furniture, beds and mattresses has improved
their shelter and health and hence their living environment.
Table 7 Assets purchased as a result of hairstyling business
Asset Percent
Communication facilities (television and radio) 62.2
Built house 11.3
Purchase building materials 2.6
Furniture (couch, wardrobes, table and chairs) 54.8
House utensils 14.3
Bed and mattress 37.4
Purchase plot and build a house 26.1
Fridge 13.9
Electrical appliances such as iron, fan, watch, oven/cooker 8.7
Salon equipment 3.9
Purchase a farm 5.7
Purchase vehicle, bicycle or motorbike 2.0
Purchase salon equipment, sewing machines, and capital for other business 5.7
More importantly, most respondents were comfortable as they own major, permanent and
durable assets from their engagement in the business, which can be used as collateral for
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acquiring loans to improve their business. This is evidence that not only has the hairstyling
business enabled them to improve their living standards by meeting both basic and social
service needs but it has also enabled them to make the necessary plans for their day–to-day life
and to ensure security in old age. Bafokuzara (1997) also noted that although women do not
make much money, the fact that they are able to purchase essential items and pay their
children’s school fees from the proceeds of their business, they consider themselves successful,
better off and satisfied. This study reveals that through the hairstyling business women are able
to make enough money to meet both basic and social needs and purchase essential assets.
To determine the impact of the hairstyling business on their earnings before and after they
engaged in the business, the women were asked what their monthly earnings were before they
engaged in the business. The average monthly income of the women before engaging in
hairstyling was 9.4 times less than their current monthly earnings after engaging in the business.
This indicates that the business has improved the economic status of women by raising their
income and hence their standard of living. When the women’s earnings before and after starting
the business are compared, it was found that the women had lower income to meet both basic
and social needs before starting the business.
Challenges Encountered by Women in the hairstyling business
Most respondents agreed that the hairstyling business pays well, but they also cited various
challenges they encounter when carrying out their business. Due to their low level of education
in terms of business matters, they do not have the ability to negotiate, advertise or care for
customers and they have problems with customers who do not speak Swahili and customers
with physical disabilities. For instance, one of the respondents had the following to say:
“When negotiating the price I sometimes find it difficult to reach an agreement. A customer
may want a certain style, but when I tell her the price she refuses, and so I fail to do business.
It is difficult to direct and communicate with disabled customers, such as the blind or dumb,
with those who are drunk or who don’t speak Swahili, but speak a foreign language”.
“Some customers are awkward; they don’t recognize that the business is difficult; sometimes
they just want their needs to be met. They don’t want to repay the money they got on credit,
they dodge paying, they refuse to pay the agreed price and want to set their own price, they pay
a low price or refuse to pay at all claiming the price is too high.
“Customers steal salon equipment and sometimes they want us to do business in their home
which is very dangerous, we waste a lot time and our security is not guaranteed.
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“We face insults from customers when the hairstyling operation is delayed or does not meet
their expectations, and when we advertise or invite them to buy our service or when we fail to
manage our time. Some operations require a lot of time and our hairstyling advertisements are
displayed on a board and anywhere you might get a customer. We don’t have facilities or a
specific area for advertisements”.
Almost all the women in this study also complained about these problems, as reflected in the
following statements:
“There is no hair braiders’ association/union to discuss issues we are concerned about,

and sometime we are not paid on time”.
“Unpleasant language from customers, gossiping, misunderstanding with customers

concerning styles, sometimes customers are not pleased with the style they have
selected and they want us to start afresh claiming that we have done it wrongly or they
want their hair to be plaited on credit”.
“Lack of health education in this business can lead to health hazards such as swollen
legs. Hard and stiff hair harms toes, dirty hair with dandruff cause diseases such as
colds, chest pains, coughing, and hair that is near the face is difficult to handle, and
sometimes you find lice in customers’ hair”.
“New customers find it difficult to believe that you can create a good style (lack of
trust). As operators we fight for customers when we find them, which results in conflicts
and misunderstanding between ourselves, and sometimes these conflicts may lead to
police cases”.
When asked about the challenges they encounter, the majority of business operators,
particularly those who do not own or have to hire frames but pay for the use of verandas,
responded that
“We don’t rent from business/frame owners as the cost of renting a chair is constantly
high regardless of the price you charge a customer. The rent is high even from frame
owners who frequently move and are unreliable. Business premise owners are unwilling
to accept customers at a lower price”.
“Our customers don’t keep their promises, and sometimes we operators are chased
away by frame owners/renters who tell us that Mwenge is not an area for our business
as the frames will soon be broken.”
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Women engaged in the hairstyling business perceive that the government and
community members do not value their business like that of other entrepreneurs
because they do not see the government intervening on their behalf regarding the
provision of an SME development, as they responded:
“Our business is not recognized by the government, we don’t see any business
development interventions, people don’t respect us, they laugh at us, we are undermined
and regarded as prostitutes when we advertise our business, men don’t marry us if they
find that we are in this business.”
This is also a major constraint in Manzese area, where they charge low prices, but operators
require customers to come with their own equipment, as claimed by one operator that
“hairstyling is hard, the earnings are low, and customers don’t come with a comb or stool.”
Other respondents indicated concerns such as unfavourable business premises, the lack of a
permanent area for their business, the present business area, Mwenge in particular, is very small
and cramped with customers and non-customers, there are many operators running other
businesses, and in most cases hairstyling is done outside the building/frame, which is sunny
and noisy. Therefore, due to fact that Mwenge business premises are small and overcrowded,
some responded:
“In Mwenge the possibility of improving/expanding the business environment is low,

and so because we are in such a difficult and unfavourable environment, many of us
don’t rent business frames directly from owners.
In addition, the working environment is dirty, hot and unattractive, waste water pipes pass
through, there is no shelter from the rain, the latrine is located far from the business area,
hairstylists stand or sit on the floor while working, there is no security for customers’ property,
no vehicles can park and there are many robberies. All these disturb and discourage customers,
leading to the absence of promising customers that include ministers, members of parliament,
big businesswomen, high-ranking officials and women from the government and private sector.
When asked about the challenges they encountered in carrying out their business, the main
response of 11 respondents employed by business owners in particular, was “ I am tired of the
business, the frame owner is a problem as she sets a lower price or wants a free service for
customers she knows” and some said that the hairstyling business is difficult and tiring, as
sometimes they work through their lunch time, the salary is delayed, and there is a lot of
misunderstanding with their boss when they fail to attend work due to sickness or attending a
burial service, as they cited:
“if you fall sick or encounter family problems such as a death or you need to attend a
wedding ceremony and so you fail to go to work, it means you receive no
113
earnings/income. Sometimes you have to work when you are sick because the family
depends on you”.
Bryceson and Kirimbai (1980) also noted that, although women are greatly encouraged to
engage in entrepreneurial activities, they face many constraints, such as lack of education,
training, capital, facilities, tools, transport and markets. This is also similar to the responses of
most women in the study who responded that:
“Due to the lack of training and skills, I find it difficult to retain customers and I don’t
know how to go about inviting customers. Also it is difficult to deal with the stiff
competition among operators, particularly that of competitors from DRC and Maasai
men”.
When asked about the challenges they encounter in carrying out their business a few business
owners cited the problems of unqualified employees, who get drunk and do not listen. The
majority (50%) mentioned challenges such as the unreliable and high cost of electricity and
water, the high cost or unavailability of wholesale hairstyling salons and equipment and the
presence of fake business materials and equipment as well as their loss. However, their main
concerns were paying the rent of business premises in advance, the lack of capital or a loan to
facilitate the renting of business premises and the purchase of equipment, the inability to save
money, the high frequency of price rises and high running costs. Some respondents complained
that children are difficult customers to handle as they cannot sit still for a long time and would
often complain of a headache during styling.
Discussion of Study Results
The study seeks to respond on three main research questions: What is the average daily earnings
of a women engaged full time in hairstyling?; how the income earned from hairstyling is used
to alleviate poverty in terms of their accessibility to basic needs and social services such as
food, housing, education, health and water and assets ownership? Or what proportion of income
is spent on each item? What are the challenges existing in the hairstyling business in Tanzania?
Regarding the average daily earnings in the hairstyle industry, the findings have revealed that,
on average, a woman engaged full time in hairstyling earns 2.3 times more than the current
national minimum monthly wage in financial institutions, and the telecommunications and
mining sectors, which pay a higher minimum monthly wage than other sectors in the country4.
This result suggests that, if the business improved, it could raise women’s income, enable them
to resolve life’s challenges and improve the living standards of their families. Based on the
4 http://www.africapay.org/tanzania/home/salary/minimum-wages/minimum-wages-faq-viewed 12/August 2013
114
2002 statistics from the Bureau of Statistics, the per capita GDP of Dar es Salaam was about
Tshs 584,086, with 35% of the population earning a low income of Tshs 387,319 per annum
(about 32,000 per month), which is less than what women earn in the hairstyling business. The
results are in line with Mnenwa and Maliti (2008), who found that small businesses generated
profits above the average salary. In fact, the average daily earnings of individual members of
the family were 18 times higher than the national monthly per capita income of households of
Tshs 39,362 (estimated in 2007). It is also important to note that the gendered differences are
obvious when it comes to earnings from micro, small and medium enterprises. For example,
according to the Dar es Salaam City Profile (2004), there is a substantial difference between
the average income of men and women. Men were reported to earn around 1.7 times more than
women. While these differences reflected a number of factors, they remain even allowing for
the difference in education between men and women.
However, according to Suich and Murphy (2002), it may not be just the cash earnings that
matter to the hairstylist, but what those earnings mean or how the income earned from
hairstyling is used to alleviate poverty, such as the potential of the income to improve access
to resources such as food, credit, healthcare and education and to invest, the risks and time
involved in the enterprise, the nature of the work and the degree of dependence or
empowerment. In overall, the earnings and consumption of women engaged in the business are
higher. The net income from hairstyling has enabled women to meet other needs, such as
purchasing household assets, expanding their business, saving and meeting other family
obligations. This is contrary to Masabo (1984), who found that women did not save much of
their income because they spent most of it on meeting family needs. The results from the
current study show that women engaged in the hairstyle business spend 11.5 times more than
those on the National Poverty Line which is the amount of money a person needs to meet his
or her basic needs (food, clothes, shelter and access to health services), which in Tanzania is
around Tsh 13,998 for 28 days or Tsh 500 per person per day according to HBS (2007).
According to BS (2007), around 34% of the urban population in Tanzania and 16% of people
in Dar es Salaam live below the basic needs poverty line. In this study, the amount spent by
individual members of the family to meet basic needs per day (Tshs 5, 725. 94 equivalent to
US$ 3.6 ) is higher than the International Poverty Line of US$1.25 a day5. Furthermore, in
2007 the percentage of people living on less than 1.25 dollar a day in the United Republic of
Tanzania was 67.87%, the percentage of people on less than 2 dollars a day was 87.87% and
the percentage of people living below the National Poverty Line according to World Bank in
the same year was 33.4%. However, according to CIA (2012) the percentage of people living
5
(http://mds.un.org/unsd/mdg/Metadata.aspx
115
below the National Poverty Line in Tanzania 2002 was 36%6. According to HBS (2007), the
food poverty line for Tanzania in 2007 was Tshs 10,219 per month per adult. This result reveals
that women in the business spend 9 times more than the national Food Poverty Line of 2007
which suggests that their families are able to have a balanced diet and good meals, enough for
their family, giving them food security.
MKUKUTA has set Goals and Targets on the Basic Needs Poverty Line, two of which are to
reduce the proportion of the urban population living below the basic needs poverty line from
25.8% (2000/01) to 12.9% in 2010 and the proportion of urban food poor from 13.2%
(2000/01) to 6.6% by 2010 (VPO, 2005). However, the findings from HBS 2007 indicate that
34% of Tanzanians (in both rural and urban areas) fall below the basic needs poverty line,
showing that a percentage of the population has difficulty meeting the basic needs of food,
shelter, health and clothing and 17% are below the food poverty line. This result suggests that
if the business improved it would provide more women with the opportunity to engage in the
business, which could make a positive contribution to meeting MKUKUTA’s goals and targets
and reduce the proportion of the population falling below the basic needs and food poverty line,
thereby alleviating poverty. The literature on poverty alleviation indicates that illiteracy, poor
housing, inadequate clothing; poor infrastructure (communications, transport, and social
services) lack of access to basic services such as safe water; food insecurity and poor
technology are the determinants of poverty. Thus the ability of respondents to meet these needs
has positive implications for their living standards and for alleviating their own poverty and
that of the country in general.
The study findings also show that respondents cited various challenges they encounter when
carrying out their businesses including inadequate business skills explained by low level of
education; lack of finances; poor infrastructure and unfavorable business environment. Similar
results were reported by Mascarenhas and Nchimbi (2003) who found that women tended to a
have higher illiteracy rate than men; were afraid to take bigger loans; lacked collateral for
acquiring bigger loans; work harder at marketing their products, but lacked bargaining and
negotiating power; and had less access to business premises and tended to be home based. The
SME Development Policy (2002) indicated that generally SMEs are confronted with unique
problems, including the heavy compliance costs resulting from their size; inadequate working
premises and limited access to finance. In addition, Business Development Services relating to
entrepreneurship, business training, marketing, technology development and information are
underdeveloped and not readily available. Moreover, SME operators lack information on these
services, which they can hardly afford to pay for, and they do not appreciate their need of them.
As a result, operators in the sector have a rather low level of skills. Also, there is no umbrella
6
(http://en.wikipedia.org/wiki/list of countries by percentage of people living in poverty)
116
association for SMEs. At the same time, the institutions and associations supporting SMEs are
weak, fragmented and uncoordinated, partly due to the lack of clear guidance and a policy for
the development of the sector. These results are also in line with Stevenson and St-Onge (2005),
who found that women’s lack of mobility, coupled with their lack of ability to secure proper
operating premises, means that they are often home-based and this prevents them from seeking
out markets, information on better economic opportunities, and assistance with their business.
Stevenson and St-Onge (2005) also found that women tend to have little financial and human
capital at their disposal.
CONCLUSION
An abundance of literature exists on poverty alleviation, but there are not many studies linking
the impact on livelihoods of specific sectors and gender in the context of a developing country.
This study seeks to fill the existing gap in the hairstyling business and improve the lives of the
women and their dependants. In fact women’s role in alleviating poverty through micro, small
and medium businesses has been recognized as women constitute the majority of the informal
workforce in most developing countries, occupying the lion’s share of vulnerable ranks.
Therefore this study contributes on the basis of the fact that it is essential for various
stakeholders to be enlightened on the value of such sectors regarded as of low economic value
such as hairstyling. The study used the absolute definition of poverty which is based on income
and consumption in relation to specific living standards and social needs. The hairstyling
business has a positive impact on poverty alleviation for women engaged in the business. The
average daily earnings of women engaged full time in the business is greater than their earnings
before they engaged in the business. After engaging in the business the women were better off
and were able to meet basic, social needs and other items.
However, despite the aforementioned success, the majority of women engaged in the business
have a low educational level, they have not received training in entrepreneurship and they lack
business skills, which results in the failure to set the price and negotiate and communicate with
customers effectively, which leads to misunderstandings and repetition of work. They face
difficulties in obtaining loans and operating premises. This suggests that if the business was
improved by facilitating access to business premises and capital and providing space for more
women to engage in it, this could raise their incomes, improve their living standards and resolve
the challenges they face in life, and those of their families and society at large. Many women
seem to be committed to their business and want to be good entrepreneurs. They want to expand
and have a modern and improved business and to experience growth in terms of capital and
employment opportunities so that they will not need to engage in socially unacceptable
behaviour such as prostitution. Through the earnings from the business the women want to
invest in the education of their children, purchase durable and permanent assets and assist their
family and relatives.
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It is recommended that stakeholders who really wish to alleviate poverty among women in
developing countries provide programmes that build women’s capacity through relevant
training in entrepreneurship, customer care, business management and any other relevant
subject. This training would provide them with the necessary skills for addressing the
challenges they currently encounter. Access to soft loans and being connected to like-minded
business operators are seen as vital for improving or growing their businesses, sharing
experiences and broadening their skills. Currently, women in the hairstyling business are not
served by financial institutions due to their lack of collateral. Interventions introduced by the
national SME policy, NGOs, financial and microfinance institutions and the private sector
should be tailor-made to benefit unrecognized sectors. In line with the national reforms in the
country’s economy in which the informal sector has a crucial role to play, efforts should be
directed at assisting the sector. This study focused on earnings and expenditure, but did not
capture other variables triggered by the sector such as job creation and rural-urban migration
among others. Further studies should consider these indicators which may inform the country’s
economic policies.
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Influences on the Start-up and Growth of Small and

Medium Enterprises in Tanzania
121
Wineaster Anderson7
Department of Marketing, University of Dar es Salaam, Dar es Salaam, Tanzania
Abstract
This paper analyzes the influences on the start-up and growth of SMEs. The interviews
involved the institutions providing business support services to SMEs and a total of 150
randomly selected SMEs from the Tanzanian commercial city of Dar es Salaam. The context
description was used in the analysis for qualitative data, while the multiple linear regressions
estimated how selected independent variables predict the start-up and growth. The influences
range from inborn individual attributes to complex relationships between often changing
business environments. The competitive activities and location, inadequate finance, human and
social resources, and technical and management skills play a crucial role in the start-up. Also
the country’s regulatory framework leads to excessively complex registration and licensing
requirements. Inadequate technology and physical infrastructure have resulted in a shortage of
premises and even the few premises available are well beyond the financial ability of most
SMEs. Unreliable electricity does not help their start-up and growth. The study provides
managerial and policy implications.
Keywords: Small and Medium Enterprises, start-up, growth, Tanzania
Introduction
Small and medium enterprises (SMEs) have dominated the private sector which plays an
important role in the economies of both developing and developed countries. Enterprises range
in size from micro to very large. Economies throughout the world have started focusing more
and more on small and medium-scale enterprises. This is mainly because attempts to promote
economic progress by establishing large industries have usually failed to improve the lives of
the majority of the communities, particularly in the developing countries (Anderson, 2011;
White Paper on International Development, 2000).The recent global economic downturn has
witnessed many of the world’s largest companies continuing to engage in massive downsizing,
dramatically cutting the number of employees regardless of their retirement age. This has in
many ways created another population of entrepreneurs, who enter the private sector with a
wealth of skills and long experience of business management. For example, in the USA alone
while entrepreneurs launch 550,000 businesses each month, large companies shed about
7
Address correspondence to Professor Wineaster Anderson, Department of Marketing, University of Dar es Salaam, P.O.
Box 35046, Dar es Salaam, Tanzania. E-mail: wineaster@udbs.udsm.ac.tz; Tel: +255754387250
122
214,000 jobs and during the same period of time small businesses created 1,625,000 jobs
(Scarborough, 2011).
Due to the globalization of trade, efforts made by the private sector in many developing
countries have led to the emergence of the SME sector and to being a significant component
of economic development and the creation of employment (World Bank, 2011; Anderson,
2012). Sub-Saharan African countries have witnessed a major reform of their public enterprises,
with governments adopting the small enterprise model for economic development. These
enterprises are now key players in creating employment, alleviating poverty and empowering
women (Kaijage and Mwaipopo, 2004).
For example, SMEs in Zambia employ nearly 55 per cent of the working population and in
Mozambique, 98.6 per cent of enterprises are smaller enterprises employing 46.9 per cent of
the country’s workforce (Fumo and Jabbour, 2011; Richardson, 2004). In Tanzania, the sector
employs between 3 and 4 million people, accounting for 20 to 30 per cent of the total labour
force and contributing between 35 and 45 per cent of the country’s gross domestic product
(World Bank 2011; Anderson, 2011). Because of the importance of SMEs, the country has,
since the 1980s, made efforts to foster their development so that they can trade smoothly, both
locally and internationally, and to address the challenges they face in terms of marketing,
management, infrastructure, technology and regulations. These efforts include facilitating
credit facilities and exploring markets for their products. Naturally, SMEs have found a home
in developing countries, mainly because they can be easily established since their requirements
in terms of capital, technology, management and even utilities are not as demanding as for
large enterprises. However, their full potential has not yet been realized due to the fact that they
face various constraints from the start-up stage to the survival stage and these constraints have
not received enough attention by academics (Anderson, and Mzee, 2013). That information
gap triggered this study.
The purpose of this study is to analyze the influences on the start-up and growth of SMEs
through analyzing the influence of individual attributes and assets (i.e., innovation, vision,
exposure to knowledge, commitment to growth and entrepreneurial tendencies) and the
business environment and institutional support (i.e., financial and non-financial services) on
SMEs’ start-up and growth. The findings are expected to be relevant in many developing
countries because there is some uniformity in the business models in their economies. For
example, the study results will inform policy makers about what standard approaches and basic
management practices for establishing policies are needed to guide the start-up and growth of
enterprises. The study is expected to provide input to the institutions supporting SMEs in
various ways for them to create relevant links and to enable them to fully comprehend the needs
of SMEs. To achieve these objectives, the next section covers the literature review, the third
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section covers the research methodology, and the findings section follows before the study’s
conclusion.
Literature Review
SMEs Contextual definition
In reality, what constitutes a small or medium-sized enterprise is still debatable as numerous

definitions exist, each one valid in its own context. The definitions, in most cases, vary from
country to country and between different sources of enterprise statistics (Anderson and Saidi,
2011). In the Tanzanian context SME definition is given in the SMEs Development policy (see
Table 1) by the United Republic of Tanzania (URT) Ministry of Industry and Trade (2003);
whereby the SMEs cover non-farm economic activities - mainly manufacturing, mining,
commerce and services.
Table 8 Definition of SMEs in Tanzania8
Category Number of Employees Capital Investment (TShs)
Micro enterprise 1-4 Up to 5 million
Small enterprise 5-49 5 to 200 million
Medium enterprise 50-99 200 to 800 million
Large enterprise 100+ Over 800 million
Source: URT Ministry of Industry and Trade (2003)
The Influences of SMEs Startup and Growth
What really influence the SMEs startup and growth has received a considerable debate in the
entrepreneurship literature (Wawire and Nafukho, 2010; Nichter and Goldmark, 2005;
Temtime and Pansiri, 2004; Mead and Liedholm, 1998). However, the theoretical perspective
underpinning the analysis of the factors influencing SME start-up and growth is taken from
three different schools of thoughts. The organization life cycle perspective which considers
growth as a natural phenomenon in the development of the enterprise (Sexton and Smilor,
8 1 US$ is equivalent to Tanzanian shillings 2150 in 2015
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1997; Carland et al, 1984) is the first. The second perspective considers commitment to growth,
entrepreneurial tendencies and the nature of the business environment as the major influences
on business start-up and growth (Zimmerer and Scarborough 2005; Shane et al, 2003; Papadaki
and Chami, 2002). The third perspective considers that enterprise start-up and/or growth are
the consequences of strategic choice, competitive advantage of the enterprise, innovation and
exposure to external knowledge (Benzing et al, 2009; Porter, 2008; Schumpeter, 1934).
Figure 2: Influences on the start-up and growth of SMEs
Enabling
business
environment
Institutional support
Start-up and growth of

SMEs
Innovation, vision
and exposure to Commitment to
external knowledge growth and
entrepreneurial
tendencies
However, given the nature of emerging economies where the natural phenomenon in the
development of the enterprise has been very difficult to prove, this study has chosen to focus
on the individual attributes and assets (such as commitment to growth and entrepreneurial
tendencies, innovation, exposure to knowledge) as well as the business environment and
institutional support (including financial and non-financial services) as the factors influencing
SME start-up and growth. This study proposes the influences on the start-up and growth of
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micro and small enterprises in the conceptual framework presented in Figure 1. The framework
suggests that the owner-managers need to be creative and innovative with a clear vision and
knowledge of the venture to be pursued and its anticipated results. Access to new brains, ideas
and knowledge affect the business births, closures and expansion according to Mead and
Liedholm (1998) who examined the magnitude and determinants of enterprise births, closures
and expansion in the five countries of Botswana, Kenya, Malawi, Swaziland, and Zimbabwe).
Such qualities should be cultivated in combination with the commitment to grow and
entrepreneurial tendencies. As also echoed by Benzing et al. (2009), entrepreneurial tendencies,
such as the need for achievement, locus of control, and desire for independence, passion and
drive influence the business growth. The nature of the business environment surrounding the
enterprise combined with the quantity and quality of institutional support available for it would
play a crucial role in ensuring the success of enterprise start-up and growth. That is one of the
main reasons why Nichter and Goldmark (2005) believe that developing-country entrepreneurs
have to be twice as creative as their counterparts in wealthier nations if they are to overcome
obstacles, such as dysfunctional legal and financial systems, distorted markets and unequal
access to resources.
The growth of SMEs can be measured quantitatively and qualitatively. The qualitative growth
of an enterprise can be achieved through the subjective attributes of the enterprise, such as
improving the quality of the output, portraying a positive image or changing from an owner-
operated to owner-directed enterprise. The quantitative perspective is also considered, shown
by changes observed in the measurable indicators, such as an increase in the number of
employees, sales revenue, profitability or product mix.
To this end, the study responds to the research question “what are the influences on the start-
up and growth of small and medium enterprises (SMEs) in the emerging economies?” More
explicitly the study focuses on how do individual attributes/assets and the business
environment influence the SMEs’ start-up and growth in emerging economies, Tanzania in this
case. The research methodology which covers data collection techniques, the study area and
data analysis follows accordingly.
Methodology
Administratively, Tanzania has 30 regions (25 on the Mainland, including Dar es Salaam).
Micro, small and medium enterprises, which are estimated to contribute 30-35% of the
country’s GDP, constitute more than 1 million businesses engaging 3-4 million people, that is,
20 - 30% of the labour force (Anderson, 2011). The city of Dar es Salaam was chosen as the
study area due to its long history with respect to SMEs in east and central Africa. Dar es Salaam
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is Tanzania’s commercial capital where entrepreneurship and SMEs, especially itinerant
trading, were evident even during the colonial period (Anderson, 2011).
Kashangaki (2005) established that there are approximately 2.7 million enterprises in the
country, of which about 60% are located in urban areas. Dar es Salaam is the third fastest
growing city in Africa (ninth fastest in the world). The city enjoys a strategic location as it is
the country’s major international and local gateway and it serves as a hub for trade with the
five neighbouring countries of Malawi, Rwanda, Burundi, Uganda, the Democratic Republic
of Congo and Zambia. Moreover, Dar es Salaam accounts for 10 per cent of the total Tanzania
Mainland population (URT National Bureau of Statistics and Office of Chief Government
Statistician, 2013).
This study covered SMEs involved in the service, trading and manufacturing sectors. 150
SMEs were randomly drawn from identified quotas in addition to interviews with institutions
providing business services to SMEs in the country. Apart for SMEs, other stakeholders
involved include the National Microfinance Bank (NMB), Dar es Salaam Community Bank
and other Non-Governmental Financial Organizations like Promotion of Rural Initiative and
Development Enterprises Limited, Foundation for International Community Assistance, Sero
Lease and Finance Limited and Women Advancement Trust (WAT). These were selected
because many SME owners complain about financial obstacles and regulations imposed by
some of the institutions. Thus, the study sought to establish stakeholders’ opinions of SMEs’
financial challenges.
A questionnaire capturing data on individual attributes and the business environment in which
the enterprise operates was handed to respondents and retrieved after being completed. For the
analysis, the qualitative means of context description was mainly used. In addition, multiple
linear regression analysis was employed to test how the specific independent variables of
business environment, infrastructure, access to financial resources and knowledge predict the
start-up and growth of SMEs, which is the dependent variable. Multiple regression analysis
tested the existence of correlation among the variables. Thus it was used to create a model
equation which was used to predict the start-up and growth of SMEs depending on the
independent variables in a given equation:
Y = a + b1X1 + b2X2 + b3X3 + b4X4
Where:
a, b1, b2, b3, b4 are constants; X1 is the business environment; X2 is access to working capital
or financial resources; X3 is the infrastructure; X4 is exposure to external knowledge; and Y is
the start-up and growth of SMEs.
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Furthermore, the study deployed Analysis of Variance (ANOVA) to test the mean score
difference between the factors identified as influences on the start-up and growth of SMEs,
which are business environment, knowledge, infrastructure and working capital or financial
resources. The intention was to test whether the differences in score among the variables are
significant or not in influencing the start-up and growth of SMEs in Tanzania.
Findings
Characteristics of the respondents
The study involved 150 SMEs from the three municipal councils in Dar es Salaam of
Kinondoni, Ilala and Temeke. At the municipal level, locations were selected using quota
sampling. In Kinondoni, 48 SMEs, which accounted for 32 per cent of the total sample, were
involved, covering enterprises operating in Mwenge, Tegeta, Kinondoni, Ubungo, Manzese,
Magomeni, Kimara and Msasani. In Temeke the study involved 50 enterprises operating in
Tandika, Temeke Wailes, Keko, TAZARA, Mbagala Kuu and Mtongani. Also in Ilala, the
study interviewed 52 enterprises operating in Kariakoo, Buguruni, Karume, Upanga, City
Centre, Kivukoni and Kigamboni (Table 2).
Table 9 Characteristics of the SME – respondents
Characteristics Percentage
Business location
Kinondoni 32.0
Temeke 33.3
Ilala 34.7
Education level
Primary education 14.0
Vocational education 4.0
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Ordinary secondary education 33.3
Advanced secondary education 5.3
Diploma 14.0
Bachelor Degree 25.3
Master’s degree 4.0
Gender
Male 54.7
Female 45.3
SMEs ownership status
Sole proprietorship 88.0
Partnership 9.3
Family 2.7
Nature of business
Trading 54.0
Service provision 26.7
Manufacturing 19.3
Number of employees
1-4 82.0
5-49 26.0
50-99 2.0
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Size of startup capital
Up to 5 million 75.0
5 to 200 million 24.7
200 to 800 million 0.3
Sources of Financing
Grant and loan from friends and relatives 12.0
Loan from banks 22.7
Loan from non-governmental and microfinance institutions 34.0
Own savings 33.3
Factors influencing the start-up and growth of SMEs
Most of owner managers decided to start SMEs out of necessity and for survival, while others
did so to improve their standard of living, which included those who do two jobs, as they are
employed while at the same time running their own enterprises. The slight growth in the
number of SMEs is due to those who entered the field because of their need to achieve. Figure
2 summarizes the reasons for starting a business.
Figure 3 Reasons for starting a Business
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When it comes to the role of regulatory and institutional frameworks in promoting the start-up
and growth of SMEs, some vivid examples have been recorded. While some initiatives have
been very successful others have failed to meet the intended objectives. The establishment of
SIDO in 1973 is one of the government initiatives to develop the small industry sector in the
country. Its activities include industrial estates, technology development and transfer, training
and production centres and hire purchase schemes for buying equipment. Apart from SIDO,
various institutions have been established to support enterprise development in Tanzania. They
include the Tanzania Industrial Research Development Organization (TIRDO) which supports
the utilization of local raw materials, the Centre for Agricultural Mechanization Rural
Technology (CAMARTEC), which is involved in promoting appropriate technology for rural
development, the Tanzania Engineering and Manufacturing Design Organization (TEMDO),
which is responsible for machine design, the Tanzania Bureau of Standards (TBS) mandated
to promote standards, the Tanzania Trade Development Authority (TANTRADE) which is
instrumental for the promotion of exports mainly through trade fairs, and the University of Dar
es Salaam Technology Development and Transfer Centre (TDTC), which is active in
developing prototypes and promoting their commercialization. Through the Ministry of
Industry and Trade, the government developed the SME Policy in 2003, in recognition of the
role played by micro and small enterprises in the economic growth of the country. The Policy
focused on three areas, namely, the creation of an enabling business environment, the
development of financial and non-financial services and putting in place supportive
institutional infrastructure (United Republic of Tanzania Ministry of Industry and Trade, 2003).
The MKURABITA (2007) programme was put in place to enable SMEs to formalize their land
ownership through registration and having title deeds. Unfortunately, the programme did not
work as about 90 per cent of the people asked about it knew little about it. The PTF, popularly
known by Tanzanians as “Mabilioni ya Kikwete”, was established in 2006 with the object of
supporting the informal sector with funds administered through CRDB banks throughout the
country. Unfortunately, due to poor administration, the fund did not reach the intended sector
(also see Kweka and Fox, 2011).
Education is very important as far as entrepreneurship is concerned. The introduction of

entrepreneurship education in public and private institutions in Tanzania, from tertiary to
university level, is one of the government’s efforts to impart the needed entrepreneurial
knowledge to graduates and business practitioners. The Vocational Education and Training Act
of 1994 provides the framework for the vocational training system in Tanzania. This Act led
to the formation of the Vocational Education Training Authority (VETA) which has over 630
centres throughout the country offering training in more than 34 different fields. In 2001, the
University of Dar es Salaam established the Entrepreneurship Centre to provide consultancy
131
and training in entrepreneurship and SME-related courses. The National Microfinance Policy
was created (2002) to increase access to financial services by SMEs and improve microfinance
services for all entrepreneurs with a well-defined business strategy. With the existence of this
policy, a good number of micro credit institutions were established, including PRIDE, FINCA,
VICOBA and VIBINDO. Some lending companies charge as much as 40 to 100 per cent
interest rate per year along with short repayment periods (also see Kweka and Fox, 2011).
Development partners and business associations provide capacity building, advocacy and
financial support for the formulation and implementation of policies and programmes. The
support of development partners is demonstrated by the Danish International Development
Assistance (DANIDA) Guarantee fund under Tanzanian banks such as CRDB, which aims to
provide SMEs with credit and facilitate their international trade. The government of The
Netherlands in collaboration with the UNDP helps genuine small and medium enterprises in
Tanzania to achieve better results through the establishment of special funds for that purpose.
The Management Committee of the fund initially selected SMEs in horticulture and handicrafts
to be pioneer beneficiaries (also see Anderson, 2011).
The respondents were asked how they perceive the business environment as one of the
constraints that hamper the start-up and growth of SMEs. Table 3 gives a summary of the mean
score of each attribute used for assessing the effect of the business environment.
Table 10 Mean score for the Business Environment
Variable Mean Standard

deviation
Relationship with local authorities 2.3221 1.20958
Bureaucracy of government authorities 3.5973 1.07753
Awareness of SME Policy of 2003 2.8993 1.30356
Multiple levies/taxes 3.9597 1.01262
Imported goods/services and competition from multinationals hinders 3.4966 1.36374

local SMEs
Corruption is the easiest way to develop the business 3.6846 1.06598
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The study has revealed factors influencing the start-up and growth of SMEs which include
individual attributes and assets (i.e., innovation, vision, exposure to knowledge, commitment
to growth, entrepreneurial tendencies and demographic characteristics) the business
environment (i.e., relationship with local authorities, bureaucracy of government authorities,
awareness of the country’s SME Policy, multiple levies and/or taxes, stiff competition from
imported products and local and multinational corporations, level of corruption and
institutional support (i.e., financial and non-financial services). The reliability test was carried
out on these variables to test their internal consistency or reliability. A measuring instrument
is said to be reliable if it provides consistent results (Kothari, 2007). Thus, Cronbach’s α (alpha)
was employed to measure the reliability of the sample of respondents. The accepted coefficient
to carry out further analysis should range between 0.7 and 1.0. The results from the survey
show that the variables are reliable for further analysis. Table 4 shows the coefficients of the
variables.
Table 11 Cronbach Alpha coefficients
Variable Coefficient
Business environment 0.82
Infrastructure 0.78
Financial and non-financial services 0.85
Individual attributes and assets 0.87
Confirmation of the Conceptual Framework
From the correlation analysis, it was found that the Pearson coefficient of the correlation
between capital and the overall status of the business (start-up and growth of SMEs) is 0.88,
with a significance value of 0.000, which means that the hypothesis has been accepted, and so
capital has a positive impact on the start-up and growth of SMEs. From the correlation analysis,
it was found that the Pearson coefficient of the correlation between the entrepreneur’s
knowledge and the overall status of the business is 0.66, with a significance value of 0.002,
which means that the hypothesis has been accepted, and so the entrepreneur’s knowledge has
a positive impact on the start-up and growth of SMEs. The hypotheses were tested based on
this assertion. Table 5 summarizes the results.
133
Table 12 Comparison of means between districts regarding the factors
District Business Capital / Business Knowledge

Environment Finance infrastructure
Kinondoni Mean 3.6354 3.7153 4.1528 4.1167
N 48 48 48 48
Std. .53335 .47634 .40070 .96565

Deviation
Temeke Mean 3.3700 3.6400 4.0900 4.0040
N 50 50 50 50
Std. .55969 .45095 .61924 .46684

Deviation
Ilala Mean 2.9904 3.5224 3.7083 3.8500
N 52 52 52 52
Std. .48777 .47832 .79341 .48648

Deviation
Total Mean 3.3233 3.6233 3.9778 3.9867
N 150 150 150 150
Std. .58735 .47236 .65700 .67741

Deviation
The findings show that the hypotheses have been accepted (X≤ 5%). From the correlation
analysis, it was found that the Pearson coefficient of the correlation between the business
environment and the overall status of the business (start-up and growth of SMEs) is 0.89, with
134
a significance value of 0.000, which means that the hypothesis has been accepted, and so a
conductive business environment positively influences the start-up and growth of SMEs.From
the correlation analysis, it was found that the Pearson coefficient of the correlation between
infrastructure and the overall status of the business (start-up and growth of SMEs) is 0.47, with
a significance value of 0.050, which means that the hypothesis has been accepted, and so
infrastructure has a positive impact on the start-up and growth of SMEs.
CONCLUSION AND IMPLICATIONS
The purpose of this study was to analyze the influences on the start-up and growth of small and
medium enterprises (SMEs) in the emerging economies. Specifically, the study analyzes the
influence of individual attributes and assets (i.e., innovation, vision, exposure to knowledge,
commitment to growth and entrepreneurial tendencies), the business environment and
institutional support (i.e., financial and non-financial services) on the SMEs’ start-up and
growth.
Some of the influences on enterprise start-up and growth are found along a continuum from
inborn individual attributes to complex cultural, political and economic relationships in an
often changing business environment at national, regional and local level. This study analyzes
the influence of individual attributes and assets (i.e., innovation, vision, exposure to knowledge,
commitment to growth and entrepreneurial tendencies), the business environment and
institutional support (i.e., financial and non-financial services) on the SMEs’ start-up and
growth. The study results suggest that the owner-managers need to be creative and innovative,
with clear vision and knowledge of the venture to be pursued in order to achieve the start-up
ambitions. Such qualities should be cultivated in a combination of commitment to grow and
entrepreneurial tendencies (i.e., flexibility, leadership, hard work, problem-solving ability,
persuasive powers, independence, calculated risk-taking, need for achievement and belief in
controlling one’s destiny). This is in-line with the Zimmerer and Scarborough (2005)’s
conclusion that management mistakes, lack of experience, poor financial control, weak
marketing efforts, failure to develop a strategic plan, uncontrolled growth, poor location,
improper inventory control, incorrect pricing and inability to make the “entrepreneurial
transition” have a negative impact on the firm’s growth and vice versa.
If the business is to grow, a favorable business environment surrounding it needs to be in place

as well as the quantity and quality of the institutional support available for it. When it comes
to the role of regulatory and institutional frameworks in promoting the start-up and growth of
SMEs, some vivid examples have been recorded. While some initiatives have been very
successful others have failed to meet the intended objectives. Some of the initiatives include
the establishment of SIDO which is supposed to develop the small industry sector in the
country; TIRDO which supports the utilization of local raw materials; the CAMARTEC which
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is involved in promoting appropriate technology for rural development; the TEMDO which is
responsible for machine design, the TBS which promote standards; the TANTRADE which is
instrumental for the promotion of exports. The lack of transparency in their operations and
unawareness among the SMEs about either their existence or their roles can be some of the
challenges. While some initiatives have remained underfunded, others have remained inactive
even when development partners have injected resources for capacity building (also see Kweka
and Fox, 2011). Unfortunately, the loans are not effectively spent on business purposes because
some funds are misallocated to other purposes which do not add value to the business. As a
result, many SMEs do not survive for long and find themselves in trouble with lending
institutions. Furthermore, competitive activities, inadequate financial, human and social
resources, and insufficient technical and management skills continue to play a crucial role in
business start-up and growth.
The respondents were asked how they perceive the business environment as one of the
constraints that hamper the start-up and growth of SMEs. The top three were ranked by
respondents as: multiple levies and taxes; corruption during registration stage and charging
taxes; and bureaucracy in the local government authorities or offices. These challenges
hampering the start-up and growth of SMEs have received backing from Jagero and Kushoka
(2011) who analyzed the challenges facing women micro entrepreneurs emanating from
government activities. Also MSE owners believed that corruption is a major problem, citing
the example of the Machinga complex being allocated to business politicians instead of the
intended marginalized groups. Although the 2003 SME Policy advocates the provision of an
enabling environment, there are still problems due to bureaucracy and poor administration.
Regardless of how good a producer’s product or service is, if she or he cannot get to the market
then all their efforts are wasted. Access to markets is therefore crucial for any business and
more so for SMEs.
Working capital was one of the major concerns of SMEs’ start-up and growth. In Tanzania,
most micro and small businesses are owner-financed. The start-up and operating capital come
mainly from the pocket of the owner(s) of a particular enterprise. Non-governmental financial
organizations seem to be the solution for those who failed to secure capital from other sources
which implies that the majority feel the same about the helpfulness of these organizations
regardless of the high interest rate and short repayment period.
Infrastructure is critical for enhancing the competitiveness of SMEs and creating an enabling
business environment for business growth and development. Inadequate business premises and
business clusters provided by the government featured as one of serious problems facing the
start-up and growth of SMEs. The efforts to provide business areas for SMEs to operate in have
been overwhelmed by the rapid increase in the number of SMEs in large cities like Dar es
Salaam. Furthermore, effective technology utilization, appropriate applications, and
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individually tailored solutions can create cross-sector opportunities, and so technology can play
a substantial role in SMEs’ development. The potential impact of technology on an enterprise’s
efficiency and productivity explains why its adoption and utilization presumably has strong
linkages with its competitiveness. However, most SMEs fail to adopt appropriate technology
in their operations, the major explanation being not knowing how to apply it.
Knowledge is essential for business as it can apply information on new business ideas and
markets for goods and services. Unfortunately, there is still a lack of effective business
incubators and resource centers for transferring technology. Education as a means of
consolidating knowledge and experience is very important for the start-up and growth of SMEs,
ranging from entrepreneurship knowledge to managerial soft skills. The lack of creativity and
innovative among owner-managers, with clear vision and knowledge of the venture to be
pursued in order to achieve the start-up ambitions was evident. As a result, most firms remain
small with no clear path to growth. The innovative qualities should be cultivated in a
combination of commitment to grow and entrepreneurial tendencies (i.e., flexibility, leadership,
hard work, problem-solving ability, persuasive powers, independence, calculated risk-taking,
need for achievement and belief in controlling one’s destiny).
Also the country’s legal and regulatory framework leads to excessively complex registration
and licensing requirements, which negatively affect SMEs’ operations. The unreliable and
overpriced supply of necessary utilities such as electricity, water and gas in Tanzania, as in
many other developing countries in Sub-Sahara Africa, does not help SMEs. Inadequate
technology and physical infrastructure in growing cities has resulted in a shortage of premises
and even the few premises that are available are well beyond the financial means of most SMEs
as the rents are so high. In view of that, SMEs turn themselves into ‘informal’ mobile
enterprises, known as ‘machinga’(street venders or roadside sellers), selling their wares
alongside traffic jams.
The institutions entrusted with facilitating economic growth should put in place an enabling
business environment that provides access to markets and reduces policy-induced bias against
SMEs. Specifically, the government should promote product innovation and delivery
mechanisms and build institutional capacity, including facilitating the acquisition and
dissemination of knowledge and soft skills that are crucial for the operation, management, and
nurturing of new business ideas as well as the survival of businesses. The fact is that if an
enabling environment were created to enable SMEs to prosper, this would eventually lead to
economic growth. This would be possible through reforming the tax rates, which are currently
too high, and removing the duplication of taxes, as enterprises are taxed by various authorities
under the same government. The government should ensure that the administration of legal and
business registration is transparent, as that will enable many SMEs to formalize their businesses,
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with the result that the government’s revenue will go up through the increased number of
taxpayers.
Furthermore, small micro-credit organizations which provide financial services need to be

followed up as they charge extremely high interest rates, sometimes unnecessarily to cater for
their inefficiency. Any available information aimed at supporting SMEs should be more widely
disseminated, which is not happening at the moment. It was established that the majority of
SME owners have no idea that institutional support for their businesses exists. Local authorities
should set up business infrastructure, which is well planned, with all the amenities and facilities,
including reliable power or electricity, easy access and security. Political interests should not
interfere with projects and programmes intended to help micro and small enterprises. The
government should also intervene and regulate fluctuating rents for business premises and if
possible subsidize some of the costs incurred by businesses starting up. If lending institutions
are willing to support SMEs, they should revisit their interest rates and make SMEs aware of
the packages and products they offer. The research based advice is required to be able to
transform the mindset of SME owners that perceive loans as a way of lining their pockets and
improving their status. They should also study the nature of SMEs’ businesses, give advice and
training, and treat each SME individually.
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Indirect Business Formalisation: An Inclusive Approach
to Regulating the Second Economy
Donath R. Olomi, PhD

Institute of Management and Entrepreneurship Development
P.O.Box 35036 Dar es Salaam, Tanzania, olomi@imedtz.org, 255 754 296 660
Goodluck C. Urassa. PhD

University of Dar es Salaam Business School, P.O.Box 35046 Dar es Salaam, Tanzania
goodluck@udbs.udsm.ac.tz, 255 754 371,
Institute of Management and Entrepreneurship Development
Abstract
This study examined experience and lessons from formalisation initiatives in four countries
using a descriptive-qualitative method. Findings suggest that the informal sector has a small
layer that responds to simplification of regulations and a larger one, that requires a different
formalisation framework. A new paradigm is apparently taking shape in the form of indirect or
group formalization, under which business associations facilitate traceability (registration),
control (self regulation), access to resources and services (capacity building, premises, markets,
etc) for members. Informal economy theory and policy development need to take a
segmentation approach and explore the merits and workings of these approaches.
Key words:
Business informality, indirect business formalisation, Group formalisation, Inclusive business

formalisation, Second economy, Self regulation
INTRODUCTION
Background and research issues
The economic activities that are considered informal because they operate outside the law
account for a significant part of incomes and employment in most developing countries. They
represent 82% of non-agricultural employment in South Asia, 66% in sub-Saharan Africa, 65%
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in East and South-East Asia (excluding China) and 51% in Latin America9. In Tanzania, the
sector accounts for over 60% of employment, 70% of the services consumed by the poor and
contributes 39 per cent to GDP (UNIDO, 2013). It absorbs over 62.5% of the urban labour
force annually versus 8.5% by the formal sector10.
The informal sector enables people from all walks of life to obtain power and control over their
own means of subsistence (Muller, 2004) and to flexibly explore their talents, skills and
opportunities by starting the entrepreneurial journey at a very basic level. However, these
activities are unrecorded, legally unrecognized and unprotected. Most operators grapple with
hostility, unpredictability and lack of property rights. They face poor access to workspace and
basic services and are characterised by low levels of productivity, incomes, growth and poor
quality of jobs. Informal firms do not directly pay tax and may present unfair competition to
the formal ones. Informality thwarts poverty reduction by trapping the poor in a vicious cycle
of low awareness and capacity - lack of legal protection and access to basic services – and low
productivity and income (Wangwe and Mmari, 2014).
Formalisations attempts have, however, had very limited success. Growing research evidence
shows that informality does not decline proportionately with GDP growth, or even economic
transformation. Despite substantial growth and transformation of the Indonesia’s economy
from an agrarian to an industrialized, medium income one, over 90% of its enterprises are
informal (Rosenberg, et al 2016). South Africa’s first world economy co-exists with a large
informal economy. It is estimated that 83% of the Micro, Small and Medium Enterprises in
South Africa are informal (Finscope, 2011). The main approach used to realise formalisation
is regulatory simplification. However, increasing research evidence shows that this approach
works for only a small part of the informal economy (OEDC, 2014; Olomi and Urassa, 2016).
This raises a question as to what kind of models can address this challenge.
This study sought to explore and draw lessons from approaches and modalities used to deal
with informality. The main question was what can be learnt from international experience in
managing and transforming the informal economy? The specific objectives were as follows:
To critically examine the nature, causes and types of business informality
To examine the experience, challenges, success stories and lessons from initiatives to manage
and transform informality
9
ILO, (2013). Transitioning from the informal to the formal economy, International Labour Conference Report
10
Mfaume and Leonard, (2004)
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To seek fresh insights and bring fresh ideas into the business formalisation debate
Methodology
The study adopted a descriptive-qualitative method (Lambert and Lambert, 2012) through
document review, in-depth interviews, focus group discussions and stakeholder validation
meetings based mainly on explorative research design. Through triangulation of data,
comparisons and critical reflection, the researchers identified emerging themes and patterns.
The study started without any pre conceived ideas or framework allowing important findings
to shape the report. It covered local governments, central government ministries and agencies
relevant to formalization issues, informal sector operators and their associations in Tanzania,
Ghana, Kenya and Rwanda. The geographical coverage included Dar es Salaam, Mwanza and
Moshi in Tanzania, Kigali (Rwanda), Nairobi (Kenya) and Accra (Ghana). The four countries
were selected on the basis of experiences in managing informality as identified from the
literature.
LITERATURE REVIEW
Nature and causes of business informality
The informal sector is characterized by ease of entry, reliance on indigenous resources, family
ownership of enterprises, small scale of operations, labour-intensive technology, skills
acquired outside the formal school system and unregulated and competitive markets (Hart,
1973; ILO, 2002). Commonly used criteria in identifying informal firms are legal personality,
registration and licensing, type of workspace and employment arrangements (Maloney, 2004).
A distinction is sometimes drawn between de-jure (legal) formalisation and de-facto (practice)
formalisation (Nelson, 2003. The informal economy is highly heterogeneous, in terms of type
of activity, scale of operation, quality of workspace, educational level of operators, motive,
dynamism, degree of legal compliance, etc (Utouh, 2012; Wangwe and Mmari, 2014).
There are three main theories explaining existence of business informality. According to the
exclusion model, businesses are rendered informal by legal requirements that are too complex,
costly and/or culturally alien. While most regulations were implanted from Western developed
economies, developing countries have many tiny enterprises that cannot meet the cost of
compliance (de Soto 2000) as well as high degrees of informalization of political and economic
markets whereby people make deals on the basis of informal reciprocal relationships rather
than formal procedures (Ninsin, 1991; Hyden, 2004; Anuwa Amarh, 2015). The disconnect
between indigenous and modern institutions leads to lack of legitimacy (and thus enforcement)
of the later (Hyden, 2004; Heili, 2014).
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It is also argued that the corporate and political interests may deliberately seek to sustain
exclusion of a large part of the economy from the formal mechanisms for two reasons. First,
the informal sector functions as a cost reducing mechanism for the formal capitalist enterprises,
which enables them to increase competitiveness through dependence on cheap, non compliant
suppliers and distributors (Castells and Portes 1989). Secondly, for politicians, the informal
sector may function as a vote bank. Since the informal operators do not live by the law, some
politicians take advantage of this vulnerability to trade protection with votes (Sarkar, 2006;
Mahvish and Majid, 2014; Chatterjee, 2004).
According to the rational exit model, a segment of business operators consciously decide to be
informal to avoid compliance costs associated with rules, regulations and taxes as well as the
convenience and flexibility offered by operating informally (Nelson, 2003; Maloney 2004,
Chen, 2012).
The dual economy model casts the informal sector as a unique segment of the economy,
characterized by low levels of skills, poor technology, low productivity, low incomes and
therefore inability to comply with the standards of the “modern” economy. The poor and low
skilled people find the informal sector the only option for securing their livelihoods (Lewis,
1954; ILO, 1972; Chen, 2009; Chowdhurry, 2007). Initial views of the dual economy assumed
that it was a temporary phenomenon that would disappear as the modern sectors expanded
(Lewis, 1954). However, it is now increasingly being realized that most informal operators are
trapped in a vicious cycle by their low resource endowments and legal and economic structures
that are increasingly excluding them. Several countries have already acknowledged the
existence of a “second economy” that requires a special policy and regulatory framework
(Olomi and Urassa, 2016).
3. FORMALISATION APPROACHES, EXPERIENCES AND LESSONS
3.1 Direct Vs Indirect Formalisation
The study has identified two major approaches in realising the objectives of formalisation. The
conventional approach to formalisation has been a direct one, whereby the government, its
agency or a local government deals directly with the businesses to provide formalisation related
interventions - training, information, allocating, constructing and managing workspace;
simplifying regulations and enforcing regulations. The research team observed an emerging,
indirect approach to formalizations, whereby the state, its agency or the local government
empowers and partners with business associations to improve traceability, control and access
to capacity building, access to premises and markets, voice, etc. In an indirect formalisation,
control over the informal business activities is partly through self regulation mechanisms
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within the associations or cooperatives. Below we examine and compare the experiences and
lessons from these two approaches.
3.2 Direct formalisation approaches and initiatives
The countries studied have used various direct formalisation measures, as shown in Table 3.1
Table 3.1 Direct formalisation approaches
Approach
Tanzania
Rwanda
Kenya
Ghana
Simplification of business regulations √ √ √ √
Voluntary pension schemes for individuals √ √
Training on technical or business skills √ √ √ √
Construction and management of markets and business √ √ √ √

complexes
Capacity building including provision of credit √ √ √ √
Enforcement of regulations √ √ √ √
Introduction of pension schemes for micro enterprise operators √
Introduction of health insurance schemes for micro enterprise √

operators
NB: This table may not fully reflect what is available at country level; it was conceived and
constructed after visits/interviews. It was not used initially as a framework for data collection
Simplification of regulations
All the countries included in the empirical study have implemented several programs intended
to simplify business regulations. The reforms have included automation of name search and
online registration (Tanzania, Rwanda and Kenya), mobile phone registration (Kenya) and
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online and single payment of registration fees (Kenya, Tanzania, Rwanda). Rwanda has been
so successful in reforming its business regulations that it ranks number two in Africa in terms
of the World Bank Ease of Doing Business and number 14 in the World in terms of ease of
starting business (World Bank, 2015). Yet, over 90% of its enterprises are informal. None of
the other three countries has reduced informality. Rigorous studies in Asia and South America
consistently show that regulatory simplification has very limited effect on formalisation
(OEDC, 2014; Rosenberg, et al 2016; Olomi and Urassa, 2016)
Provision of workspace
Except for Kigali, none of the cities visited have found a workable solution for providing
workspace for informal operators. In Dar es Salaam, Ilala Municipal Council borrowed funds
from a pension fund to build a six storey complex for Machingas (street traders). The building
remains largely unoccupied due to (i) an unattractive location (ii) the trading space being
enclosed and too big, and expensive for the street traders who need (and can afford) much less
space and whose business model relies on open (unenclosed) space (iii) street traders resisting
the rental fee set by the municipal council. In Kenya, Nairobi County completed Muthurwa
market, designed to accommodate 8,000 street traders in 2008. Street traders resisted the rental
fees initially set, and moved in only after it was halved. The market now accommodates 16,000
traders, twice the intended number, and is already wrecked by overcrowding and inadequate
maintenance.
Mwanza (Tanzania) and Accra (Ghana) tried to woo private investors to set up similar
complexes through public-private partnerships, but the investors turned down the offers after
realising that they would not be able to charge economic rates due to solidarity of street traders
and politicisation of the rental. Government owned premises in each of the countries have
tended to charge lower than market prices, leading to capture and rent seeking by public sector
workers and initial occupiers.
Capacity building
All local governments have some form of capacity building (training, credit programs, support
to formation and strengthening of groups of informal operators, etc) activities for micro
enterprises. Interviews in all the four countries revealed that capacity building and credit
programs designed for micro enterprises have been ad-hoc and not sustainable and not much
impact is visible.
Enforcement of regulations
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Enforcement of regulations is implemented mainly by local governments, which maintain
special security personnel for this purpose. However, given the large number of operators, local
authorities also contract private firms to collect levies and fine operators who infringe by laws.
In all cities except Kigali, this has led to persistent clashes between the law enforcement agents
and operators. The enforcement agents are often accused of corruption, destruction and illegal
confiscation of the operator’s tools and products. This harassment is one of the biggest
complaints of informal operators.
3.3 Indirect business formalisation
There seems to be a paradigm shift towards indirect formalisation of informal businesses. Some
of the indirect formalisation approaches in the four countries studied are show in Table 3.2
below.
Table 3.2 Indirect formalisation approaches
Approach
Tanzania
Rwanda
Kenya
Ghana
Working with associations to support self regulation √ √ √
Group registration/registration certificate by LGA √ √
LGA performance contracts with associations √
Health insurance schemes through associations/registered groups √
Subsidies for construction of offices √
Free office space for associations √
Issue of credit to association for on-lending to members √
Government guarantee of association loans √
Training on technical or business skills through associations √ √
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Rwanda is consciously encouraging and even forcing every business operator who cannot get
the conventional license to join a cooperative (at least 10 people are needed to form a
cooperative), with a database of members and a certain minimum level of self regulation and
services to members. Associations are encouraged to develop workspace for their members.
The local governments engage closely with the cooperatives, supporting capacity building,
access to finance, access to land and in some cases guaranteeing loans for construction of
workspace owned by the cooperative. The cooperatives organise training for members whether
it is offered by government agencies, development partners or themselves.
Though not as developed as in Rwanda, all the other three countries studied have active
associations that are working with the local and central governments, as well as development
partners, to enhance organisation, traceability, capacity and access to important services to
members. Table 3.3 summarizes what is being done by at least some associations in each of
the countries.
Table 3.3 Services offered by associations of informal workers to members
Local Authority/Functions
Tanzania
Rwanda
Kenya
Ghana
Advocating for enabling environment √ √ √ √
Capacity building (training) of members √ √ √ √
Market information √ √ √ √
Negotiating for bulk purchase of inputs √ √
Negotiating for input prices/output prices and access to markets √ √ √
Jointly building premises with LGA √
Security √
Self regulation (self policing on order and compliance to by-laws, √ √

LGA and national laws)
Access to pension schemes (registration of members) √
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Access to medical insurance schemes √
Credit to members √ √ √
Traceability (Identity cards, databases) √ √ √
Representation in employment issues √
VIBINDO Society, the biggest association of micro enterprises and informal workers in
Tanzania, provides ID cards, policy advocacy, medical insurance or finance to members.
Market (including weekly markets – magulio) traders have basic forms of internal regulations
(payment of fees, cleaning, and behaviour at the market) and provide security in markets. Motor
vehicle drivers have agreed on schedule of operations, fare, and code of conduct which are
strictly enforced.
The key feature of the policy and regulatory framework for micro enterprise in Kenya is that
operators register with associations rather than the government. The Micro and Small
Enterprises Agency (MSEA) envisions stepped up formalization, beginning with being
traceable through an association (35 members are needed to register one), getting formally
recognized premises and finally registration, with in-built incentives to move to the next level.
A Registrar of Micro and Small Enterprises Associations has been established under auspices
of the Micro and Small Enterprises Act.
Conclusion
Government attempts to directly build capacity provide finance, workspace or to regulate micro
enterprises are apparently not effective. There is an apparent paradigm shift towards indirect
formalisation, under which business associations or cooperatives are empowered to take greater
responsibility for registration, (self) regulation, capacity building, finance and provision and
management of premises. Strong associations are able to create a mutually re-enforcing
dynamic among the key pillars of business formalisation: A strong association is able to police
members, influence policy makers, provide or influence availability of premises and markets,
contribute to capacity building, which in turn attracts members and strengthens the association.
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Figure 4 Mutually re-enforcing formalisation pillars
Working through organisations owned by the informal operators may enhance legitimacy of
the regulatory mechanisms. This may be a way of countering the problem of a disconnect
between transplanted institutions with local economic actors, and according legitimacy to the
formal institutions.
4. CONCLUSIONS, LESSONS LEARNT AND RECOMENDATIONS
4.1 Conclusions
The use of indirect formalization through empowering associations and cooperatives to deliver
these formalisation services to their members is apparently far more effective and efficient
compared to use of formal government institutions. The cost structure of government
institutions as well as their capacities does not match the task of engaging with a large number
of very small and unstable businesses. As well, the use of associations resolves challenges
related to under pricing and rent seeking in workspace managed by the government. Direct
formalisation will work for only a small part of the economy and leaves out the base of the
pyramid. Indirect formalisation has greater potential of being inclusive and reaching the base
of the private sector pyramid (See below).
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Formal firms (4-10%
Potentially formalisable firms under direct formalisation (10-25%
Firms likely to become formal under indirect formalisation (e.g., 40-50%)
Firms that may not be formalized even indirectly (e.g., 10-20%)
4.2 Implications
This study has identified and documented a potentially powerful, indirect or group
formalisation approach, under which registered cooperatives or associations register, regulate
and provide critical services to informal operators. In the same way that group lending made
micro credit possible, indirect formalisation promises to make regulating and servicing micro
enterprises viable. However, the approach seems to have received almost no academic interest.
The implication of these findings is that for research and policy on business formalisation to
be effective, we need to more critically examine the nature of informality in specific contexts.
Also, it is critical to partition the informal economy into specific segments that lend themselves
better to theory development and policy making.
Developing countries should explore indirect formalisation as a more practical and inclusive
approach to legally recognize their micro enterprises. Provision of workspace and construction
of business premises for food vendors, street traders and other informal operators should be
given high priority in all urban areas. The model for building structures for micro enterprises
should change in favour of ownership by the operators through their own associations or other
private sector investors.
The findings of the study have shed some light on emerging potentials and models for business
formalisation. However, there is a lot that needs to be better understood in order to design
appropriate formalisation policy. Foremost is to learn more about different segments of
informal economy and how they are likely respond to different policy measures. Secondly to
find out how the special policy and regulatory frameworks are fairing in the countries where
they have been tried. There are many reasons why they may not work well, including resistance
by politicians and policy makers, the risk of trapping otherwise growing micro enterprises in
the second economy. It is also likely that indirect formalisation will work better in certain sub-
sectors than others. Thirdly, attention should be directed to understand how the structure of a
sector and the economy affects economic marginalisation and dualism, with a view to
151
identifying policy options that can result into a healthy co-existence of the two economies and
maximising the potential and propensity of the second economy actors to graduate.
NOTE
Acknowledgement: Funding for this research was provided by the Business Environment
Strengthening Programme for Tanzania - Dialogue (BEST-Dialogue)
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Influence of ICT in Enhancing Business Management in the 21st Century:

The use of Mobile Phones in Business Management
Irene Aurelia Tarimo: The Open University of Tanzania
irene.tarimo@out.ac.tz / irene_tarimo@hotmail.com
Abstract
The study examined the use of Mobile Phones in business management in Tanzania. The
research design used mixed methods. The tools for data collection were questionnaires,
documentation and Internet search engines. The data were analyzed by MS-EXCEL (2007).
Results indicated that 80% respondents owned mobile phones. About 80% had smart phones,
96% internet capabilities, 97% charting, 90% taking pictures, 87% access business materials
and 80% emails. Some challenges faced were wasting time in charting, telling lies and
disturbances during business hours. Business people and managers should own mobile phones
with features for business management and communicate vital business management
information.
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Key words ICT, Mobile Phones, Business Management
Introduction
Caudill (2007) contended that there are two orders of mobile phones viz low end mobile phones
which are of 1st and 2nd generation of 1G and 2G orders. The phones under this class are
basically used for text messages and voice communication. The second orders of mobile
phones are of high end mobile phones which have the capacity of 2.5G and 3G orders. Now
there is 4G. These classes of mobile phones have additional data services capabilities such as
file transfer, internet access, thesaurus, calculators, cameras and many other features. See
Appendix I: Four different categories of Mobile Phones.
Literature Review
The use of Mobile phones being led by China, India and United States of America, up to the
end of the year 2011, there were about 6 billion mobile phone subscribers in the world which
is equivalent to the 85 percent of the world population (www.itu.int) as narrated in Table 1.
Table 1: Top 25 Countries, Ranked by Smartphone Users, 2013 - 2018
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Source: eMarketer estimates, 2014
Worldwide, about 7 Billion people are using Mobile phones (www.pulitzercenter.org/) and the
number of smart phone users worldwide will surpass 2 billion in 2016
(http://www.emarketer.com/Article/2-Billion-Consumers-Worldwide-Smartphones-by-
2016/1011694#sthash.dmjMlGsS.dpuf).
Today there are 2.6 billion smartphone subscriptions globally and those 6.1 billion smart phone
users works out to some 70% of the world’s population using smart phones in five years’ time,
a measure of just how central these devices are becoming to how we communicate with each
other and do much more in business management.
Ericsson predicts that regions like Asia Pacific, the Middle East and Africa will account for
80% of all new subscriptions in the next five years. That is 80% of mobile data traffic will be
from smart phones by the end of 2020. Ericsson noted that the 2014 football world
157
championship was “one of the biggest social media events that boom played out on mobile
with people using their smart phones to text, talk and post on social networks about their
business. In all the World Cup generated 26.7 TeraBytes (TB) of traffic, “the data equivalent
of 48.5 million digital photos plus 4.5 million voice calls.” With this worldwide introduction,
there is a gap whereby Mobile phones can also be used widely in business management to boost
the business owners and their clients. In Australia, Judy et al. (2007) found that the mobile
phones use was for talking (97%) and SMS texting (87%) and use the Voicemail facility to
recover messages. Around a third use the mobiles to capture or send visual images; a quarter
to play games; a similar proportion use their phones to enter competitions or to vote on SMS
polls; about the same number for accessing the internet; and under a quarter use their phones
as an MP3 player or a radio. In Australia there is a very high awareness of 3G (86% of males
and 75% of females). But 61% of respondents indicate that do not access any internet services
via their mobile phone. Those who use the 3G network, use it for email, information services,
e-banking and music. Over 57% of the workers thought that it would be ‘very easy’ or
‘moderately easy’ to do their job without mobile phones. Conversely, one third (35%) thought
it would be ‘difficult’ or ‘moderately difficult’ to work successfully without their mobile. A
mere 8% thought it would be ‘impossible’ to do their job properly without a mobile phone.
However, there is a dramatic difference in response by gender, with three-quarters of women
workers saying that it would ‘easy’ to do their jobs without a mobile, while the majority (58%)
of men thought it would be ‘difficult’ or ‘impossible’. Managers are the most likely (59%) to
take their phone on holiday to conduct business, whereas only 30% of clerical workers do the
same. The majority of women consider that the mobile phone has a neutral effect on their
productivity, while men are more positively disposed, especially tradespersons.
In Africa the leading Mobile phones users are the Kenya and Uganda Airtel, and the South
African Vodacom. Mobile phones have different uses, but sending text messages (SMS and
MMS) and taking pictures or video and charting in social media are the most popular activities
among mobile phone owners. In a few African countries, such as Kenya, Uganda and Tanzania,
mobile banking and business management are relatively practiced. Other activities, like
browsing political news, accessing social networks, getting health and consumer information
and looking for the Jobs are less practiced as in Figure 1. The data in Figure 1 are among the
main findings of a Pew Research Center survey in seven sub-Saharan African nations. The
survey was conducted April 11 to June 5, 2014, among 7,052 respondents in Ghana, Kenya,
Nigeria, Senegal, South Africa, Tanzania and Uganda. All interviews were face-to-face.
Comparison figures for the U.S. are from 2014 Pew Research Center surveys. (For more on
technology use in Africa and other emerging and developing nations worldwide, see Internet
Seen as Positive Influence on Education but Negative on Morality in Emerging and Developing
Nations, released March 19, 2015). Across the seven African countries surveyed, roughly two-
thirds (2/3) or more say they own a cell phone. Ownership is especially high in South Africa
158
and Nigeria, where about nine-in-ten (9/10) have a cell phone. A third (1/3) of South Africans
(34%) and about a quarter (1/4) of Nigerians (27%) say that their device is a smart phone, i.e.,
one that can access the internet and apps, such as an iPhone, Blackberry or Android device.
Smartphone ownership is less common in the other nations surveyed, and in Tanzania and
Uganda it is still in the single digits. By comparison, 64% in the United States owned a
smartphone as of December 2014 (http://www.pewinternet.org/2015/04/01/us-smartphone-
use-in-2015/)/.
Figure 1: Findings of a Pew Research Center survey in seven sub-Saharan African nations
In terms of age, mobile phones are common among young and old alike. About the same
number of 18- to 34-year-olds and those 35 and older own cell phones in all but one of the
African countries surveyed (Tanzania). But there are age gaps in every country on smart phone
ownership. For instance, in South Africa, 41% of 18- to 34-year-olds own a smart phone, while
only 27% of those 35 and older do as in Table 2.
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Young More Likely to Use Cell Phones for Texting, Taking Pictures or Video than older ones
as in Table 3.
In Tanzania, Simon and Øystein found that Small and Medium size Enterprises (SMEs) play a
key role in the economic growth of any country. The application of modern Information and
Communication Technologies (ICTs) can improve the performance of SME by reducing
communication costs. The mobile technology is considered to have transformative effect on
SMEs, with an opportunity to grow through the simplified business information exchange.
The highly educated are particularly likely to own cell phones and smart phones. For instance,
93% of Ugandans with a secondary education or greater own a cell phone, compared with 61%
of those with less education. And in South Africa, 57% with a secondary education or more
own a smart phone versus 13% with less education. Therefore, mobile phones can be used as
the tool to boost business management for socio-economic development as an effort to meet
the Sustainable Development Goals (SDG’s).
Tanzania has made a remarkable progress in deploying ICT; access of technologies such as
Internet, computers, satellite, radios and mobile phone has been growing fast in the past 10
years in Tanzania (URT, 2003). Despite the rapid improvements, Tanzania’s ICT environment
is still somewhat challenged. According to Swarts and Wachira (2010), Tanzania accounts for
8% of the mobile phone users in Africa and is ranked fourth after Nigeria, South Africa and
Kenya as indicated in Figure 2.
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Figure 2: Few own smart phones in Africa but cell phones are common
In Tanzania there are seven registered voice call mobile operators which are Vodacom, AirTel,
Tigo, TTCL, SasaTel, Benson and Halotel. The use of mobile phones in Tanzania depends on
the economic level, the ICT technology ability levels and population education level, along
with companies’ products, country politics situation and demographic characteristics.
For instance, in Tanzania, the fishermen, farmers, business people, workers, students and
religious people to mention just a few are now be able to get the information required through
the use of programmed SMS and MMS or by direct calling to the clients. A business person
for example, can just send a text message to the instructed number where the list of prices from
different markets in the country is sent back automatically. Thus, mobile phones can be used
in boosting the business management in this free market mechanisms and globalization world.
The research tried to answer the questions on how Mobile phones can boost business
management and maintain prosperity. What are some positive and negative effects that Mobile
Phones may have on the business? Which are the challenges faced by the business owners as
well as their customers and their mitigation measures?
Research Objectives
The main objectives of the present study were to:
To identify the types of mobile phones used in business management.

161
To examine advantages of using mobile phones in business management.
To investigate the challenges of using mobile phones in business management for strategizing
their mitigation measures.
Methodology
Design of the study
This study employed survey in both quantitative and qualitative methods. Quantitative was
used to identify the types of mobile phones that boost business management through surveys
as the primary data. Qualitative was used to find out the how mobile phones boost business
management as well as the challenges faced in using them through questionnaires and
interviews for the secondary data.
Research instruments
The research tools involved unpublished documentary reviews; the use of open ended
unstructured as well as closed, semi structured and open ended structured questionnaires and
semi structured interviews to the business owners and their clients.
Sample, sampling and selection of the participants
The research involved a total sample of 60 business people. These included 30 business owners
and 30 clients/customers who were selected by random technique to provide an equal
opportunity for each to be involved from the population. The secondary data were collected by
documentation and Internet search engines. Thus, total respondents were 60 from a population
of 240 different business people.
Data analysis
Data analysis used statistical techniques such as content analysis, averages, percentages, ratios
and graphs by Microsoft Excel (2007), Statistical Package for Social Sciences (SPSS version
20) for Windows, (2007).
Results
The results indicated that out of the 60 respondents owned mobile phones. About 80% had the
smart phones with the features to boost students in their business management. The smart
phones of the respondents about 96% can access internet, 80% help in receiving management
162
and administrative messages, 75% can be utilized as dictionaries, 80% can be used as
calculators, 90% taking pictures or Video while 80% can use in reading and sending emails
and 97% for charting in social media as shown inn Figure 3. Some of the challenges faced by
the business people included wasting time in charting in the social network, sending and
receiving unnecessary information for business management by their smart phones, telling lies
about love affair issues and disturbances during business hours.
Series1, Series1,
Pictures , Internet, Internet
90%, 13% 96%, 14%
Charting
Series1,
Series1, Messages
References,
Charting,
87%, 13% Emails
97%, 14%
Series1, Calculators
Dictionary, Series1, Dictionary
75%, 11% Messages, References
Series1, Series1,80%, 11%
Calculators, Emails, Pictures
80%, 12% 80%, 12%
Figure 3: Various uses of the smart phones in the business management
Discussion
The results of this study indicated that out of the 80% of the respondents owned mobile phones
which is similar to the study conducted by Nyandara (2012) between the Open University of
Tanzania (OUT) and Center for Continuing and Distance Education (CCDE-China) where both
participants (more than 80%) from both institutions have access to mobile phones. A study
conducted by Angello (2015) at Sokoine University of Agriculture (SUA) found that mobile
phones were used more (92.1%) than other ICTs e.g., radio (21.7%) and television (24.6%).
Internet was used by very few livestock keepers (2.4%) due computer and Mobile phones
illiteracy. According to Ngalinda and Mutagahywa (2005), access to the Internet and computers
is extremely limited. Only 2% of people in Tanzania have email addresses and most of these
live in Dar es Salaam. More than three-quarters of those who have email addresses use free
public accounts. Only 2% of all households in Tanzania have a computer, all in urban areas.
Even then, a mere 15% of these are connected to Internet, and they almost exclusively live in
Dar es Salaam.
163
This study indicated that 96% of the smart phones of the learners can access internet while,
87% can access reference educational materials which compares well with Nyandara (2012)
who found that in the CCDE 88.9% and OUT 89% students can access internet facilities in
their mobile phones and access to study materials in the DVDs/CDs by majority of CCDE
students (about 90% and above) compared to only 60% of students from OUT. In 75% of
Australian households had home internet access with more than 88% of individuals own at
least one mobile phone, 10% have two phones, while few (1.4%) have more than two.
Audiotapes, CDROMs and videotapes are reported to be used both in Tanzania and China
(Zhang, 2001; Maro, 2008). In China about 80% of higher learning institutions had access to
computers and internet in 2006. About 76.6% of offices, 42.2% of classrooms, 49.4% of
dormitories of all higher learning institutions have connection to internet (Guo and Cai, 2006).
It was found out that 80% of the respondents use their mobile phones in receiving
administrative messages, use in reading and sending emails. A study of Tindell and Bohlander
(2012) in U.S.A reported that (90%) of college students had sent or received a text message
(SMS) in their university classes. This is similar to the study by Ng’umbi, (2009); and Mnyanyi,
et al. (2009) reported that students of Open University of Tanzania have been using mobile
phones to facilitate communication among them and regional centres staff and to read online
materials despite the hidden cost to students and small capacity of their phones to read some
documents like PDF files. However, Nihuka and Voogt, (2011) found that despite that mobile
phones are owned by majority of students and instructors, both instructors and students
confirmed that those mobile phones are not used for delivery of courses and communication.
This gives the impression that mobile phones facilitate communication among students
themselves and regional centres, by means of administrative staff and not their instructors.
Emails have been used in China to facilitate communication among students themselves and
their instructors in the institutions settings business, to submit assignments to their instructors
and to post e-learning materials for students to read (Lee, 2004; Guo & Cai, 2006).
This study also found that 75% of the smart mobile phones can be utilized as dictionaries, 80%
can be used as calculators, taking pictures or Video 90%, while 80% can use in reading and
sending emails and 97% for charting in social media.
Conclusions
The research tried to answer the questions on how Mobile phones can be used as the business
tools to boost business management and prosperity. The findings revealed that 80% had smart
phones with the features to boost business in their management with 96% internet, 87 access
business materials and 80 emails capabilities. Some of the challenges faced included wasting
time in charting, sending and receiving unnecessary information for their business, telling lies
164
about love issues, disturbances during business hours. The business people should own mobile
phones with features that boost their business through communications. The business people
and the management should use mobile phones in their daily activities and to communicate
important business and administrative information to their customers and other stakeholders.
Implications
Basing on the findings of this research, it implies that business people and managers should
own mobile phones with features capable for boosting business prosperity and communicate
the relevant business management information to meet the sustainable development goals.
Thus, it can be suggested that:
Mobile phones should be used for business management purposes and other activities in life.
It is crucial to study the specifications and capacity of mobile phones before buying them.
Mobile network operators (MNO) should reduce internet service tariffs so that the business
people, workers, farmers, fishermen, the learners and so on can afford to buy the smart phones
for their business management purposes.
Relevant government bodies like the Tanzania Communications Regulatory Authority (TCRA)
in collaboration with mobile phone service providers in Tanzania such as Vodacom, Airtel,
Tigo, Zantel, Sasatel, Benson and Halotel as well as the internet service providers should
reduce the tariffs and costs of using mobile phones and internet services so that all business
and academic institutions are able to use them effectively.
Mobile phone designers and the service providers should also design, maintain and provide
content quality smart phones to their customers and avoid the replica/fake ones.
Ministry of communications should regulate, strategize and monitor information systems and
data security.
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husbandry knowledge to urban and peri-urban communities in Tanzania. Sokoine University
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Guo, W. & Cai, Y (2006). Responses of Chinese Higher Education to the Information Society.
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open and distance learning institutions in developing countries: The experience of the open
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166
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167
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Appendix I: Four different categories of Mobile Phones
These Mobile phones are divided into four different categories: Basic, Feature, Smartphone
and Tablet.
(Source: USAID Handbook on Mobile phones for International Development, 2014).
168
Motives, Support and Constraints behind Female Entrepreneurs in
Tanzania: Review of Theoretical Literature and Proposed Conceptual
Framework
Charles Mbeye Limbert

Open University of Tanzania
lumbert.mbeye@out.ac.tz lambertmbeye@gmail.com
Abstract
Female entrepreneurship is considered an important tool in enabling female empowerment and

emancipation. Increasingly, it has also been marketed as crucial for increasing the quality of
life of women in the developing world. The objective of this paper is to review the theoretical
literatures of female entrepreneurship, focusing motivations, development support and
constraints behind female entrepreneurship in the developing world - and more specifically in
Tanzania and proposes a conceptual model. This is a conceptual research. The conceptual
model developed indicates the motivation factors, development supporting factors and the
constraints facing female entrepreneurs in developing countries.. The study suggests areas of
research to be investigated may include; the influence of education on female entrepreneurship,
the prospects of entrepreneurship to all marginalized groups in the community. More research
is advocated in female entrepreneurship to understand the phenomenon both the urban and rural
areas of Tanzania and also to understand the differences in home-based versus non-home-based
female entrepreneurs. This study therefore can act as a framework for a researcher to design
and implement specific studies.
Keywords: Female entrepreneurship, developing world, Tanzania, female entrepreneurs
1.0 Introduction
Female entrepreneurship has long been associated with concepts such as female empowerment
and emancipation. Increasingly, it has also been marketed as crucial for increasing the quality
of life of women in the developing world. It has also been encouraged as a way of making
changes to the status-quo of women in the world and re-addressing the balance of power within
the family unit. The benefits of female entrepreneurship are many and varied, and have been
researched in great detail in the past. As in any complex undertaking, women entrepreneurship
usually focus on survival and growth of the enterprises managed and controlled by women with
less attention on those factors that are most likely to result in business failure when they are
starting their businesses. The priority choices and sacrifices made by women entrepreneurs can
take the form of individual opportunity cost decisions, in which they reject alternative
competing activities that vie for their time and consideration (Kickul, Welsch and Gindry,
2001). This necessarily means that other obligations and activities that can help them handle
the challenges they are likely to face in business should receive more attention. The purpose of
this research is to facilitate the discussion on how best to empower women using
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entrepreneurship. This will in turn help in the marketing of entrepreneurship as a tool for female
empowerment and emancipation. This paper presents a review of female entrepreneurship in
the developing world but the emphasis in Tanzania.
2.0 Objectives of the study
The main objective of this paper is to review the literature and propose a conceptual model of
female entrepreneurship in Tanzania. It specifically focuses at;
Exploring the motivation factors influencing women to become entrepreneurs in Tanzania, to

realize the development supports of female entrepreneurs in Tanzania and Identify the major
constraints facing female entrepreneurs in Tanzania.
3.0 Literature review
3.1 Entrepreneurship and the Entrepreneur
Schumpeter (1934) described the entrepreneur as the innovator who introduces something new
into an economy” and “…Kirzner (1997– authors‟ own addition) stressed the fact that the
entrepreneur is the decision maker in a particular cultural context, who commands a range of
behaviors that exploit these opportunities”.
Donnely et al. (1990) described the motivations and operations performed in order to establish
the definition of entrepreneur. He stressed that “…An entrepreneur is an individual who has
been propelled by an idea, personal goals, and ambition, brings together the financial capital,
people, equipment, and facilities to establish and manage a business enterprise”.
While defining entrepreneur, some writers have employed economic indicators like growth and
profit, or incorporated entrepreneurship as an effective tool in reducing poverty. Entrepreneurs
“seek out and identify potentially profitable economic opportunities [and such are] agents of
growth” (OECD, 1998: 11, in Farr-Wharton and Brunetto, 2007: 2).
In any activity, we cannot eliminate the characteristics of human behavior. Winn (2005) to
establish a definition on such characteristics “…One who prospects for or exploits
opportunities and who has a tenacity to face challenges” Roomi and Harrison (2010: 3) quote
Stevenson (1983: 1) to state that entrepreneurship is “the pursuit of opportunity without regard
to the resources currently controlled” and go on to quote Shane and Venkataraman (2000)
“Entrepreneurship concerns the environment conditioning opportunity, the process of
discovering opportunity, the evaluation and exploitation of opportunity, and the individual
decision-makers who do these things”. Certain writers portray entrepreneurship as a human
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behavior linked to personal achievement “Entrepreneurial behavior is often driven by diverse
reasons including the desire for personal accomplishment” (OECD, 1998 in Itani et al. 2011:
2). Some authors also mention that entrepreneurial behavior is visionary, with its concern being
the exploitation of possessions in a more refined manner. Hampton et al. (2011: 2) quote
Timmons (2009) to state “Entrepreneurial behaviour is about utilizing resources beyond the
immediate scope of the entrepreneur and his or her venture…”
In the context of this study, entrepreneurship is defined as someone who has intrinsically
decided and motivated to start a business after exploration of an opportunity, owns and operates
it, driven by an ambition to achieve despite the challenges from the environment.
3.2 Female Entrepreneurship
There is one gender-specific definition the authors came across that specifically appealed to
them due to its emphasis on female entrepreneurship. “Female entrepreneurs are defined as
those who use their knowledge and resources to develop or create new business opportunities,
who are actively involved in managing their businesses, and own at least 50 per cent of the
business and have been in operation for longer than a year” (Moore and Buttner, 1997 in Farr-
Wharton and Brunetto, 2009: 2)
In the context of this paper, we will extend this definition to explicitly include home-based
female entrepreneurs women’s enterprises are those which were started, are owned and are
managed by women. This means the woman is both the major owner and decision-maker of
the enterprise. This definition was necessary in order to exclude those women who run
businesses started by or owned by men. This definition is in line with the need to empower
women in terms of ensuring they have greater access to and control over resources and
decision-making. Upward mobility was measured by a combination of indicators, including
increased number of employees, formalization, quality of employment, improvements in
premises used, and other businesses established (URT, 2003)
3.3 Context of Female Entrepreneurs in Tanzania
Women entrepreneurs (WOEs) play a key role in the private sector and MSMEs in Tanzania.
The proportion of WOEs is reported to have increased from 35 per cent in the early 1990s
(NISS, 1991) to 55 per cent in 2005. The latest baseline survey (MIT, 2012a) places this figure
at 54.3 per cent, suggesting that it has stabilized. High motivation for running a business, a
decreasing purchasing power of wages earners and increasing unemployment are some of the
main reasons why many women engage in income-generating activities. In most developing
countries and particularly in Tanzania, women-owned and operated businesses have
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increasingly played an important role in stimulating economic growth and creating new job
opportunities (UDEC, 2002).
The International Labour Organization (ILO), in partnership with Irish Aid, promotes women‘s
entrepreneurship development and enhances employment opportunities for women, including
women with disabilities or living with HIV/AIDS, by building the capacity of governments,
communities and organizations representing workers and employers to support them at all
stages of their economic growth. SIDO has been geared towards the establishment of locally
supported business development services, including advice, group training and sustainable
programmes of support for women entrepreneurs (SIDO, 2005).
According to URT-MIT, (2003), Recognizing that women have less access to productive
resources such as land, credit and education due to cultural barriers, and that they stand on
uneven ground in Tanzania, Tanzania SME Development Policy specifies that gender
mainstreaming will be enhanced in all initiatives pertaining to SME development, and outlines
the need for specific measures that promote women’s entrepreneurship. These are stated as
follows:
Facilitate SME service providers to design special programmes for women entrepreneurs and
disadvantaged groups; and Identify factors inhibiting women and disadvantaged groups from
going into business and design programmes to address those factors.
Although by November 2003 specific strategies for addressing women’s enterprise

development had not been drafted, according to a key informant, the implementation plan will
take a sectored approach supported by the rationale, “if you want to grow the Tanzanian
economy, you have to develop the food sector, and if you want to does that, then you have to
develop women”
4.0 Discussion
The subsequent section of the paper has discussed concepts and theories from developed and
developing countries focusing female entrepreneurship. Special attention has been paid on the
motivational factors for women to start businesses, secondly on the factors supporting women
entrepreneur’s development and finally discuss the constraints facing women entrepreneurs in
Tanzania.
4.1 Motivation factors behind women Entrepreneurship
The social capital prospect is not necessarily the same for males and females (DeTienne and
Chandler, 2007). Most writers describe the motivating factors for female entrepreneurs using
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the pull-&-push theory “The array of factors that may contribute in varying degrees to
„pushing‟ or „pulling‟ a woman into business ownership” (Stevenson, 1986 in Itani et al. 2011:
3).
Personal factors like self fulfillment and achievement are motivational factors for females
across the globe. One significant factor contributing to this is the status of females in society,
especially in the developing world like Tanzania. Their leadership-role is discouraged; they are
considered subservient to males (Dzisi, 2008). They come to business because they want to
prove themselves to others, including family members (Itani et al. 2011). With the world
becoming a global village, many women even in remote and far-flung places are becoming
exposed to the idea of financial independence as a route to empowerment.
In many countries, spouses work together to run the household. This also means that issues
such as childcare costs acquire greater importance, along with the opportunity cost of letting
go of a stable income in order to earn what may possibly be a risky venture. We cannot deny
the importance of financial factors while pursuing an entrepreneurial activity.
Although some researchers disagree with this (Roomi et al, 2009), it has been pointed out by
most researchers in this area. In some cases, it has been observed that self-employed females
cannot cope with this challenging environment as compared to paid employment (Rosti and
Chelli, 2009) and hence their motivation may suffer. This is an important factor to consider for
any policy that aims to encourage long term female entrepreneurial involvement to foster socio-
economic development.
The job-market situation also poses threats to females and they may become entrepreneurs to
find more opportunities. At jobs, females may not be provided with roles that allow them to
grow according to their capabilities (Remi-Alarape et al. 2009). Their growth may be barred
and a certain atmosphere is created in which they cannot elevate themselves from their current
position to high ranks. (Dima Jamali, 2009) – The proverbial glass-ceiling.
In some cases, it has also been observed that females become self-employed because there is
no paid employment available for them and self-employment is their last resort (Jamali, 2009).
Secondly in most cultures, females are generally only involved in household activities; their
self- employment is discouraged. This sometimes prompts women to rebel against expectations
by becoming self-employed; it gives them self fulfillment (Smile Dzisi, 2008) and an
opportunity to prove themselves (Itani et al. 2011).
In lower-income classes, female entrepreneurship may be due to the need to meet family
expenses, while among middle-income groups it can be attributed to the desire to raise the
standard of living. (Nadgrodkiewicz, 2011).
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According to ILO research in Tanzania; Most of the women entrepreneurs are engaged in
business as a way of creating employment for themselves. Other motives include
supplementing income, security, enjoyment of the work they are doing, use of existing
competencies, and doing business as a hobby. Most start informal activities at home either as
hobbies or means of meeting household needs, and later develop these into serious business
activities. Early socialization and role models play a big part in motivating women to start
business. Factors helpful in starting and developing businesses include skills and competencies
acquired prior to starting the business, non-financial and non-financial support from family and
friends, and availability of capital, equipment and working tools (ILO, 2003)
4.2Development supporting factors
International Development Programs
International development programs on female entrepreneurship involve all the efforts made
by developed nations, world financial institutions and other organizations working world-wide.
They include financial & technical aid, assistance to managerial skills and other opportunities
to grow business. USAID (Ibrahim, 2009) and World Bank (McLymont, 2008) are forerunners
in this category. The International Labour Organization (ILO) entered into a general agreement
with the Ministry of Industry and Trade (MIT) in 2003 to implement a Women’s
Entrepreneurship Development and Gender Equality (WEDGE) Programme1 in Tanzania
(Stevenson.L & St.Onge.A, 2005).
Local Governmental, Financial, and Not-for-Profit Institutions
The role of females in the development of a country cannot be neglected or underestimated

(Langowitz and Minniti, 2007) as it not only provides a platform for women to prove
themselves (Eddleston and Powell, 2008) but also contributes to the welfare of the overall
economy. Governments worldwide are taking steps to promote female entrepreneurial
activities.
Studies have stressed the need for effective governmental planning and strategies to promote
and encourage female who are or want to be an entrepreneur (De Bruin et al. 2007).
In Tanzania, ILO–Irish Aid Partnership Programme helps provide business knowledge and
training; access to markets through trade fairs and exhibitions; support services; and,
strengthens women entrepreneurs’ voice and representation through networks and groups.
Training also emphasizes confidence building and encourages women to see and take
advantage of business opportunities in their immediate surroundings. In 2007, over 200
Tanzanian women participated in ILO–Irish Aid sponsored programmes and activities aimed
174
at building their confidence and skills as entrepreneurs, and enhancing their knowledge on
topics including, among others, management, business plans, production, costing and pricing
that have been adapted to specific country conditions (ILO, 2007 Report)
In many parts of the world, ground realities are different despite funding and effort. Female
entrepreneurs still have problems due to the lack of governmental support (Singh and Belwal,
2008). Businesses formed by women are sometimes of very small scale and may not even be
registered with the government (Tambunan, 2009
Most governments are putting efforts into encouraging female entrepreneurship but many
women are unaware of these schemes to promote their businesses (Itani et al, 2011). However,
this situation is not true for all women; those who are well-informed, keep an eye on support
programs and are able to develop links are utilizing these opportunities efficiently to grow their
businesses (Farr-Wharton and Brunetto, 2007).
Financial institutions play a vital role in promoting the growth of entrepreneurial activities.
Females across the globe complain about lack of financial resource (Halkias et al. 2011). Credit
lines for female entrepreneurs granted by financial institutions have not been of significant
volume. However, there is some evidence that reveals the other side of the picture. Growing
competition in the African banking sector is compelling banks to gain more female customers
in order to increase their profit (McLymont, 2008).
4.3Constraints Facing Women Entrepreneurs in Tanzania
There are a number of reasons why people start a business. It may be hard to start a business
in any circumstances, but evidence shows that some people or groups of people find it more
difficult than others. People who are marginalized by the society such as women, some ethnic
minority groups, the disabled and those in rural areas may find it harder when they attempt to
start a business (Fuller-Love et al, 2006:430).
For women, the common barrier is the difficulty in accessing resources, especially finance
resources, for their new venture (Brush et al, 2004). However, Ssendi and Anderson (2009)
found that a major problem for rural women entrepreneurs was not the acquisition of financial
capital but concerns about how to repay it.
Women face discriminatory treatment in the society and state administration because of their
perceived role, which makes entrepreneurial environment for them very unfavorable (Erdem,
2004. Women are said to fear for engaging in business-related activities that may interfere with
their family responsibilities. Because women are burdened with family responsibilities, they
lack enough and ample time for learning and/or looking for business opportunity (Winn, 2005).
175
Winn continues that, even boys and girls who grow in the modern households are tamed with
different views. The boys are reared to work hard and achieve for themselves while girls are
disciplined to perform the household chores and wait for somebody to support them. For
example, traditional Arab culture view women as mothers and caretakers of the home (Jamali,
2009:237) and household chores are seen as humiliating when done by men (Marikova, 2002).
Lack of information and education has also been identified to limit most female entrepreneurs
in their endeavors (Blenker et al, 2003). This includes the lack of access to government services
for training and support for women (Stanger, 2004).
In Tanzania, factors that have been reported to influence women’s entry and effective
performance in entrepreneurial activities are lack of access to capital, scarcity of raw materials,
poor technology, inadequate markets and low profitability of enterprises (Olomi, 2009).
According to Kimbi (1989), lack of capital and credit services were identified as main
constraints for women’s effective participation in business in Dar es Salaam. Mbughuni reports
that, together with time constraints, opportunities for women to engage in business are very
limited. Also Kiggundu (2002) reports that the unfavorable legal systems, unequal access to
education and sex stereotyping education and training system have limited women’s
participation in entrepreneurial activities.
Gender Issues Research Report Number 9 (GIRR 9) of 1995 reports that, in Tanzania, other
things remaining the same, cultural values, traditions and norms have greatly influenced the
way women participate in entrepreneurial activities. It was also found that the society’s
construction of what embraces male and female roles and responsibilities, behavior and values,
which have resulted in distinct gender division of labor in society, have also been manifested
in the dynamics and development of female entrepreneurship in Tanzania. However it does not
single out exactly what are these cultural values, traditions and norms, and in which ways they
affect women’s participation in entrepreneurship in Tanzania.
5.0 Proposed Conceptual Model
Based on the review of the literature of concepts of entrepreneurship and female

entrepreneurship, the study wishes to develop a conceptual model of female entrepreneurship
that has will provide a clear picture of female entrepreneurs in developing countries with a
special focus of Tanzania. This does not mean that entrepreneurship for males and females is
a completely different phenomenon; however, both encompass varied aspects due to the
different traditional expectations from these genders, especially in the developing regions of
the world.
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Motivation factors for women to
become Entrepreneurs
Development Supporting
Factors
FEMALE
ENTREPRENEU
CONSTRAINTS
Figure 1: Proposed Conceptual Model of Female Entrepreneurship
5.0 Conclusion
Understanding the socio – cultural background and how it impacts on the daily entrepreneurial
activities of female entrepreneurs calls for joint awareness and effort from stakeholders from
community to national levels. It is of great importance that female entrepreneurs and the
activities they undertake be fully understood as a contextualized phenomenon. This
understanding may aid in motivating and supporting them. The state, local and international
organizations may also assist in improving the environment where these entrepreneurs operate.
The importance of female entrepreneur’s contribution to developing economies cannot be over
emphasized, bearing in mind the economic contribution they make to their families, community
and (sometimes without being aware) to their nation’s economy. There are constraints which
may hamper the entrepreneur’s ability to perform well. These constraints impact on the whole
process of entrepreneurship at all stages. For the poor rural female entrepreneurs in a poor
country like Tanzania, the improvement of existing macro and micro entrepreneurship
operating environment is vital. Strategic short and long term interventions to address problems
facing female entrepreneurs may be one way of improvement of enabling environment. Female
entrepreneurs may be assisted to improve their performance by designing specific programmes
for female entrepreneurs. Tanzanian communities have a role to play in improving the
177
performance of entrepreneurship which in turn improves their livelihoods in their areas. Times
have changed and change of attitudes towards better life and more hard work might assist
entrepreneurs to reach their goals. In the long run this change of attitude and support may
encourage communities to support government initiatives and vice versa. Recognition of the
role played by women in Tanzania may bring about changes which will facilitate poor rural
female entrepreneurs and assist in improving policy and practice. Understanding what women
need may be a good starting point, and then appropriate interventions may be put in place and
may bring changes which in turn will benefit the economy and improve the lives of people.
Support services should, nonetheless be based on understanding the process of
entrepreneurship from the women’s point of view.
Suggestions for further Research
This study has paved a way for further studies in the area of female entrepreneurship. This
study, like many others has established the importance of conducting context specific studies
which aims at improving the way people do things and eventually better their livelihood. The
depths of issues affecting female entrepreneurship in developing countries may be better
understood by conducting further research.
More specific research may be conducted to give a more distinct understanding and depth to
the influence of socio-cultural background on rural female entrepreneurship in Tanzania.
The study further suggests areas of research to include; the influence of education on female
entrepreneurship, the prospects of entrepreneurship to various marginalized groups in the
community of Tanzania.
More research is advocated in female entrepreneurship to understand the phenomenon both the
urban and rural areas of Tanzania and also to understand the differences in Home-based versus
Non-home-based female entrepreneurs.
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Review and Analysis of Women Entrepreneurs Challenges in the
Construction Industry – the case of Tanzania
Nyamagere Gladys Sospeter, Lecturer at Ardhi University, Tanzania and
Prof. PD. Rwelamila, Professor at University of South Africa, School of Business Leadership
Abstract
This research aimed at providing insights on the challenges women face when establishing and
developing businesses in the construction industry in Tanzania. The case study research
strategy was employed in which six cases of women entrepreneurs in the construction industry
(WECI) were explored. Data were collected through a combination of methods, including in-
depth interviews. The findings show that, challenges were grouped in terms of managerial,
technical, financial, socio-cultural and gender. The findings further provide some information
on how socio-cultural environment pose different types of challenges to WECI for guiding
them to formulate effective policies and improve the business environment.
Key words; Construction, Women, Entrepreneurship, Challenges and Tanzania
1.0 INTRODUCTION
The entrepreneurial potential of women to contribute to wealth creation and employment by

starting and developing their own businesses has not been fully realised and utilized because
of the systemic challenges that face them (Lincoln, 2010; Nchimbi and Chijoriga, 2009; Rosa,
2013). Globally, women who choose to pursue entrepreneurial ventures have had limited
representation in the construction industry which limits their contribution to economic
development (Wangle, 2009; Verwey, 2005; Hakala, 2008; Worrall et al. 2008). The under-
representation of women entrepreneurs in the construction industry (WECI) has been caused
by various factors, such as the background women come from and choice of business.
Women’s choice of business activities is dictated by their reproductive roles and abilities in
terms of education, entrepreneurial capacity, business and technical skills (Lincolin, 2010).
Gender roles can be found in the activities of daily life in which individuals are engaged
(Sospeter, 2014). These roles are performed according to social norms, shared rules that guide
people’s behavior in specific situation (Fakhiri et al. 2012).
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Women are marginalized due to social and cultural structures. However, the social structures
and cultural systems that reinforce the continued subordination and marginalization of women
have a major impact on their perception of success (Ericson and Luther-Rune, 2012; Nchimbi
and Chijoriga, 2009). Partly as a result of this, women are limited to educational, socialization
and financial resources which are very important for business start-ups and development.
Although, women comprise 51.4% of the Tanzanian population (URT, 2012), they are
marginalized and so less able than men to participate in primary sectors such as the construction
industry. Consequently their participation in salient sectors such as education, employment,
decision-making positions and business is lower than that of men (Utouh, 2011; URT, 2012).
The ratio between male and female is still imbalanced (URT, 2009). Needless to say, the
number of females who take science and technical studies in higher learning institutions is low.
This partly explains the under-representation of females in decision-making positions and
businesses which require high levels of professional and technical education such as the
construction industry (Mascarenhas, 2007).
Previous studies and models inform this study on how individuals enter entrepreneurship and
the challenges they encounter based on diverse personal and environmental forces. Studies
focusing on women have consisted of a large percentage of women entrepreneurs in
traditionally women dominated businesses, where women are over-represented, and most of
the studies are on entrepreneurs in developed nations. Even though WECI are equally
entrepreneurs, they are a special category in the so-called NTIs for women, and not much is
known about their entrepreneurial behaviour in the construction industry in Africa (Kapp and
Hunter, 2008). Therefore, the existing knowledge, variables or experience cannot be used as
generic factors to understand the forces and challenges that confront women in the construction
industry in Tanzania.
Although literature reviewed identified a number of issues hindering women path to start and
develop their business, it is not possible to use the available set of variables as generic factors
that face women in the process when starting and developing businesses in the construction
industry. This is because some researches have focused on women in developed countries.
Other of these studies were criticized for being biased towards male entrepreneurs’ experience
and made male entrepreneurs the standard against which women’s experience as entrepreneurs
has been judged (GEM, 2012; Lincoln, 2010; Wangle, 2009). Therefore the current research
fills this empirical gap by focusing on WECI when they start and develop businesses in
Tanzania. The next sections of the paper is literature and research methodology before
embarking on presentation of findings and discussion. Last section is the conclusion and policy
implications.
Barriers women entrepreneurs face when starting a business
183
The literature indicates that, it is primarily the barriers which lead to the low participation rate
of women in the construction industry. These barriers are entrepreneurial, capital, macro-
economic and institutional, factors affecting women’s business choice and the socio-cultural
barriers as discussed below.
Entrepreneurial barriers
The barriers that women entrepreneurs experience are defined as entrepreneurial access barriers,
entrepreneurial survival barriers and the poverty trap. Verwey (2005) identifies barriers facing
women entrepreneurs as traditionally male-dominated environments, lack of access to financial
resources, lack of support and the lack of basic life skills such as self-confidence, self-
motivation and communication. On the other hand Rosenburch et al. (2009) and Hakala (2008)
summarized the barriers and suggested that the entrepreneurial challenges fall into three
categories: (a) human capital, (b) strategic choice, and (c) structural barriers. According to
Hakala (2008), the barriers/challenges facing women in NTIs are the lack of technical
knowledge, the lack of confidence and the ability to make strategic choices to improve their
financial position.
Capital as a barrier
Access to capital is one of the main stumbling blocks preventing women from starting their
own business in greater numbers (Rosa, 2013). Access to capital markets has been regarded as
among the most important resources denied to women. The reasons why women are
disadvantaged in capital markets were cited as less experience and equity in business, out-dated
gender role beliefs and the women themselves believing that they will receive differential
treatment when applying for finance (Verwey, 2005; Nchimbi and Chijoriga, 2009; ILO, 2003).
Furthermore, financial institutions require middle management experience, start-up experience
and a technical background, whilst women have had limited access to higher levels of education
and training in general as well as to mentors (Verwey, 2005; Fakhiri et al. 2012).
The identification and removal of such barriers is key to furthering entrepreneurship and to
stimulating the economy in all sectors. These barriers exist in each country on the African
continent (Pines and Shwartz, 2008). Obviously, the extent and severity of these problems vary
by gender or type of entrepreneur, sector, nation and region. For example, it is reported that
entrepreneurs in emerging nations face more formidable challenges than their counterparts in
industrialized and developed nations, and that women face greater challenges in most areas
than men (Utouh, 2011;Hakala, 2008; ILO, 2007). WECI face more challenges than women
entrepreneurs in the service, retail or hospitality sectors. These barriers hinder women from
realizing and utilizing to the fullest their entrepreneurial potential and force them to work in
jobs where their talents cannot be used to the fullest.
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Macro-economic, institutional and regulatory environment as barriers
As regards the three most important factors, namely the macro-economic, institutional and
regulatory environment, much needs to be done to create an enabling environment for
entrepreneurs, especially for women who are more sensitive to the impact of these factors.
They insist on the importance and success of incubators to overcome some if not most of these
barriers that are within the domain of local government and these incubators could be extended
to remote areas. It is common practice for women to produce marriage certificates when signing
contracts to confirm ownership of property. The media often portray women in domestic roles
or as sex object (Verwey, 2005). It is therefore essential that women begin to insist on defining
themselves, instead of being defined by men (Lowrey, 2006; Gupta et al. 2012). Because of
the “gender gap” in tertiary enrolments in sub-Saharan Africa, women are worse off
educationally (Kikwasi, 2005; Verwey, 2005). In the course of advocating for women’s
economic empowerment we also have to deal with men’s perceptions that a woman’s economic
independence means that she is growing away from him.
According to African tradition, it is expected that a successful women will help others. It is
therefore difficult for them to grow their own businesses by ploughing profits back into them.
The primary problem is that women suffer oppression and discriminatory burdens in all walks
of life (Kikwasi, 2005). These burdens must be identified before they can be removed. The
majority of women continue to be denied their economic citizenship leave alone jobs in male-
dominated sectors. They find themselves up against a multitude of barriers when they want to
enter a mainstream economic activity (Lincoln, 2010).
Women’s choice is often linked to necessity or to time and location flexibility that can
accommodate independence and family needs and child rearing (Nchimbi, 2003). These can
be construed as constraints and even as barriers by women. To overcome these specific
constraints and barriers, universal best practices are key to addressing the need to reform the
social and entrepreneurial environment. Eliminating barriers to competition, reducing
regulatory burdens and providing more efficient services for new and developing firms will
benefit all individuals interested in starting a business in the construction industry (Gupta et al,
2012). Supporting policies by themselves are not sufficient to increase women’s involvement
in entrepreneurship if the issues facing women are not known.
The challenge of developing women’s enterprises is, therefore, different in developed countries
from that in developing countries (Gupta et al, 2012). In developed countries, the initial
challenge is to increase women’s share of business ownership by encouraging more women to
start businesses, removing impediments, and improving their access to economic resources
(e.g., credit, business advice and entrepreneurship training). According to Gupta, et al (2012),
the second challenge is to address their growth barriers, that is, to increase the percentage of
185
women-owned enterprises that grow rapidly. In developing countries, a higher percentage of
women are often found in the micro-enterprise sector, particularly among informal enterprises,
and so the challenge (in the short-term) is less about trying to increase the number of women
entrepreneurs but more about how to legitimize and strengthen the base of their activity so they
can grow their enterprises. It can be concluded that two different countries, for example
developed and developing, have two different goals which makes this topic worthy researching.
Factors affecting women’s business choice
According to Hakala (2008), the barriers/challenges facing women in the NTIs are the lack of
technical knowledge and the lack of confidence and the ability to make strategic choices to
improve their financial position. The study undertaken by (ILO, 2003) indicates that many
women lack exposure and socialization, which restrict their ability to identify a business
venture with higher growth potential. They are likely to be found operating in groups from
home, and often lack social, cultural and business support for their role as entrepreneurs (ILO,
2003, Wangle, 2009). As a result, women are over-represented in some sectors (i.e., women-
related industries) and under-represented in others (NTIs). Entrepreneurs experience these
challenges in different sectors and at different stages of their evolution from infancy to maturity
(Dainty et al. 2007; Worrall et al. 2008). These are the challenges/barriers women face when
entering a women-related industry, but we need to know about those women who have made a
strategic choice and are developing business ventures in the construction industry.
Socio-cultural norms and beliefs as barriers
In addition to the above challenges, socio-cultural norms and beliefs have continued to produce
patriarchal societies that reinforce the continued subordination and marginalization of many
women entrepreneurs as portrayed by feminist theories (Nchimbi, 2003; Gupta et al, 2012).
Partly as a result of this, women have limited access to financial resources and lack prior
entrepreneurial competency, which contribute to the specific challenges of starting and running
a business by women entrepreneurs (Nchimbi, 2003; Gupta et al, 2012; Ericson and Luther-
Rune, 2012). Sospeter (2014) states that women are not free to take up any business niche
because the reality is that many societal practices based on cultural beliefs, customs and
religion still discriminate against women. They are regarded as minors in the eyes of the law
and the wife’s capacity to contract, inherit or own property and to litigate is not fully recognized,
but instead their male counterparts remain guardians and heads of the households. Those who
venture into the construction industry are seen as interfering in men’s work.
Therefore, since there is a wealth of practices and theoretical work on entrepreneurship and
promotion around the globe, this study focuses on understanding the challenges women face
when they start and develop business ventures in the non-traditional industry, with the evidence
186
of patriarchal pressures on them in a developing country in Africa. Failing to understand these
factors may result in the under-utilization of women’s human capital, resulting in the
perpetuation of lower living standards and the implementation of costly and ineffective policies
(Rusenbusch et al. 2009; Gupta et al, 2012). In addition, there are general barriers/challenges
that WECI face in the context of a developed country, but there might be different or additional
barriers, depending on the environment, in a developing country. Most of the above-mentioned
extrinsic barriers are facing women or hindering them from venturing into their traditional
industry. However, the intrinsic barriers/challenges WECI face when developing a new venture
are not well known, All these barriers affect women entrepreneurs at each stage of establishing
and developing their business.
2.0 RESEARCH METHODOLOGY
The case study research method was used in this research as it provided the possibility of
gaining insights into the experiences of WECI (Yin, 2009). Six cases of WECI were conducted.
The use of multiple cases allowed the key themes from recurring concepts, relationships and
explanations to be tested in several different situations. Information about WECI was obtained
from the CRB data base to establish the number and profile of the targeted firms before
embarking on the case study. Dar es Salaam was chosen firstly to serve as a standard because
of the availability of many WECI, as 59 out of 153 WECI are in Dar es Salaam (CRB, 2015).
Secondly, there are more opportunities for expansion of construction activities than in other
cities. Thirdly, it was convenient and cost effective to do repeated interviews in Dar es Salaam.
This is to say, it was possible for the researcher to follow projects developments through
repeated social interactions with WECI, which in turn facilitated direct observation.
The firms whose owners are women (major shareholders) were considered as a potential target
for case studies. The criteria set were that the firms must be registered, be owned by a woman,
make key decisions, have more than 31/2 years’ experience as per (GEM, 2012; ILO, 2003)
suggestion, have undertaken more than 2 projects of not less than TAS 200 million in value
and also have upgraded/grown from one class to another (i.e., from a lower to a higher class).
Interested respondents were selected and interviewed. WECI who expressed their perceptions,
experiences and opinions on the challenges that face women entrepreneurs in the construction
industry were purposively selected. The cases chosen appeared to qualify based on the initial
interviews and the criteria set. The interviews were conducted first with WECI and then key
informants in the same firm, such as project managers, engineers and other staff members
involved in the business were interviewed. The interviews were extended to outside the firm’s
key informants, including representatives of the CRB, and consultants, contractors and major
clients who had worked with WECI. In addition, the use of multiple sources of evidence in
case studies allowed the researcher to address a broad range of historical and behavioural issues
exhibited by the WECI.
187
Data was analyzed by organizing the data into categories on the basis of the themes and
concepts, after which the relationship between the concepts was then analyzed and finally
linked in a sequence (Creswell, 2009). In the process, raw data was categorized into conceptual
categories to generate themes and concepts. Thus, data coding had two concurrent activities,
namely mechanically reducing data into manageable chunks and analytically categorizing the
data. The tools of analysis explained above were applied within the case and across the case
analyses. Within-case analysis is when the analytical tools focus on the phenomenon in one
case. Across-case analysis is when the analytical tools target comparisons of phenomenon
between two or more cases. In within-case analysis detailed case studies are written up of the
represented cases. Thematic case analysis followed and formed the basis for the analysis.
Across-case analysis was undertaken as a means of extending external validity or
transferability by looking at multiple actors in multiple settings. This was seen as further
enabling generalizability (Denzin and Lincoln, 1994; Yin, 2009). The key themes, relationships
and explanations were tested in several different cases. Each case was then seen as a replication
of the questions under study. Multiple cases also assisted in the identification of themes,
relationships and explanations that apply in some settings but not in others (Creswell, 2009).
In searching for patterns, the results were compared with patterns predicted from theory or the
literature. The themes from the interviews were used to form common patterns to answer the
research question.
RESEARCH FINDINGS, DISCUSION AND ANALYSIS
Cases Presentations
This section provides a presentation of each of the six cases participants and the current status
of their enterprises. The focal data are presented in a composite table for each case. The
presentation are considered by the researcher to be fundamental themes.
Across the cases analysis
This section attempts therefore to put together a cross-case analysis of all Six cases that were
studied and presented. It highlights what seems to be working for further recommendations.
The idea is to capture a better understanding of women’s experience in terms of motivations
for the best practices of WECI in the construction industry. The section begins by matching
common themes that emerged from each of the studied cases. These themes emanated from
field data rather than the reviewed literature.
Table 1: Common Barriers/Challenges facing Women as Depicted in the Cases
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Cases Barriers faced by WECI in the entrepreneurial process
Start-up capital, Capital for re-investing in construction, merely being a woman,

Egra project location, company demands and family life, management of many
projects, and theft of materials on site.
Capital for re-investing in construction, unsupportive husband, project locality,

negative perception of women’s capabilities, lack of technical education, work,
Bestina
family and business, inflation, theft on site, winning projects, competition and
corruption.
Getting projects in construction, delayed payments, society’s negative perception

Vannessa of women, favouritism and discrimination, unrealistic tender figure, stiff
competition, corruption, business and family, inflation, theft on site.
Negative perception of women’s capabilities, Age, capital for re-investing in

Naomi construction, merely being a woman, managing multiple projects, inflation and
theft of materials on site, lack of technical education, delay in payment
Late payment, unsupportive husband, gender stereotyping, negative perception

of women, project location, theft on site, lack of technical education and
Marlize
industrial experience, discrimination, balancing business and family life, and
getting projects.
Competition, family and business as a single parent, fake materials, inflation,

death of husband made clients to withdrew from giving them projects, theft of
Sezia
materials on site, lack of technical education, getting projects, societal perception
of women’s capabilities.
As depicted from Table 1 the common barriers/challenges are getting projects, project location,
managing multiple projects, negative perception on women capabilities and balancing life with
the company demand. The commonality of these challenges emanates from the nature of
industry activities. These challenges have been grouped into managerial, financial, technical
and gender. Moreover, the socio-cultural environment poses challenges to WECI.
189
Discussion of Common Barriers/Challenges Women Face when Starting and Developing a
Business in the Construction Industry.
There were variations between WECI in top registration classes and those in lower classes in
terms of searching for opportunities and pursuing opportunities and project management. For
those who qualified as contractors, construction was often the only business they would
consider despite the hardships encountered in the form of financial, physical and emotional
aspects.
Financial challenges
Financial issues such as lack of access to commercial credit and financial institutions were
frequently mentioned in the case study findings as among the stumbling blocks preventing
women from starting and developing businesses. The finding is consistent with the literature
that indicated that financial constraints were notably worse for those in NTIs (Aylward, 2007;
Fakhiri et al. 2012). This is true because financial institutions did not easily lend money to
women as few of them owned assets. Banks sometimes demanded the husband´s signature for
using property as collateral even when the woman was the owner of the property in question.
According to Lowrey’s study, this is a clear sign of the hierarchical litigation principle in the
gender system where the man was seen as higher in the hierarchy (Lowrey, 2006; Ericson and
Luther-Rune, 2012). Despite these financial constraints, the case study findings indicated that
finance for starting up an enterprise was considered less of an issue and a minor barrier to
women starting a business in the construction industry than during its development. This is
because they obtained start up capital from their family, friends and own savings. On the other
hand, working capital and re-investment capital for developing their business ventures was
mentioned more by women. Generally, all the WECI studied agreed in essence that it was
harder for women than men to secure a bank loan.
The study found that payment delays were another challenge to most WECI. This challenge
was well documented in the reviewed literature in that it led to time overruns as well as poor
quality (Kikwasi, 2009; Sospeter, 2009; Pines and Shwartz, 2008). The researcher observed
that delays in being paid were notably not only while the work was in progress but also when
it was completed. Similarly, these delays were the result of various other factors, such as the
nature of the clients, the terms and conditions of the contract, and consultants. Likewise,
payments were sometimes delayed due to being invested in fixed accounts so that they can
extract profits before paying their contractors, which was not a good habit in the construction
industry.
Managerial challenges
190
Management capabilities were critical and were experienced as barriers by most WECI as
business owners in the industry, though at different levels of intensity. However, managing
projects without possessing a technical background was indeed a challenge faced by many
WECI in the construction industry. WECI who had received a technical education or
experience of the industry encountered less challenges in the entrepreneurial process than those
who had not. This study revealed that when WECI businesses grew, they had a hard time not
only managing their firms but also operating the whole project, including procuring and storing
building materials, plant and equipment on site. Corruption was associated with big projects
and so it was a major limiting factor. It was evident that big projects had good returns and so
they needed well-established management capability and in most cases they involved a high
level of corruption (Rwelamila, 2009).
Location of projects and managing more projects were another challenges for WECI.
Depending on where the project was located and the nature of the activities required them to
work far from home, with inflexible time and long working hours. WECI needed enough time
for the company, family as well as society. As a result some WECI failed to engage in projects
outside their region of residence, especially those who had young children to attend to. Due to
this challenge some WECI did not work far from their regions of residence, which again limited
their growth. Historically, women were neither meant to work outside their home nor engage
in culturally unacceptable activities such as construction.
Striking a balance between work and family was considered a challenge by women who start
and develop businesses in the construction industry. These case study findings are consistent
with the reviewed studies as shown in the Table 2 below, which found out that, through self-
employment, women were able to combine family life with their careers (Gupta et al, 2012;
Utouh, 2011; Nchimbi and Chijoriga, 2009). The researcher was of the opinion that, when
WECI grew their businesses, they succeeded in accumulating a lot of wealth. As a result they
had to purchase in bulk and store their materials in warehouses and so people took advantage
of their growth to cheat or become untrustworthy and that is how most WECI lost control of
their enterprises in terms of their safety and security. This was what tempted most employees
to strike deals and be involved in stealing at various construction sites.
Technical and accessing projects challenges
Among other general barriers that WECI face as learnt from the cases studied was the lack of
enabling measures when it comes to accessing business opportunities as indicated in Table 1.
The lack of a technical education by those who had not received one was another challenge as
the society did not understand them when they decided to start a business. This affected women
even when they needed to secure projects. Obtaining projects and societal negative perception
on women’s capabilities were among challenges faced WECI due to cultural values (Sospeter,
191
2014; Gupta et al, 2012). WECI were discriminated against and went through different types
of categorization. These types are gender and social categorizations. For example, social
categorization of “us and them” had an impact on obtaining projects. Sometimes WECI were
not given or considered for projects by the tendering committee because of the gender
categorization of “men and women” which questioned women’s capabilities. As a result, these
types of categorization impacted WECI negatively in the business development process.
Although men are also affected, women are more affected when they start and develop
businesses. This is because factors relating to the negative perception on women’s capabilities
of venturing into the construction industry do not usually affect men. The “categorization
mentality”, which introduces bias because of the differences in values and norms and which is
aimed at separating men and women has been added to the existing literature.
Identifying opportunities and winning projects in the construction industry were other
challenges that face WECI. Although winning projects is a problem for both men and women
due to the competition, it is more challenging for women because of their limited time which
arises from multiple roles, that is, household, reproductive and community. Adding business
only multiplied the roles and made it even harder. For WECI to persist and develop their
business they needed a high level of socialization and good networks, which are restrained by
social and cultural factors. These findings are consistent with the existing literature, which
indicates that networking helps to generate a business, especially in a competitive male-
dominated industry (Lincoln, 2010; Wangle, 2009; UNIDO, 2013). The finding of this research
supports the knowledge that women’s business networks are important for increasing their
level of support. Their restricted and homogenous networks made it harder for them to obtain
information and resources outside their immediate network and to win projects.
Social-cultural and gender challenges
The study’s findings indicated that, although most WECI managed to start and develop their
business to some extent, cultural and societal factors still restricted their freedom to excel in
the construction industry. These values still cause the marginalization and subordination of
women. This was evident in a case when a male associate passed away; it was as if he went
down with their clients, who then withdrew their support. Unlike WECI who married
supportive husbands and therefore seek support from them, those in a less favourable context
and who married unsupportive husbands were in most cases not allowed to socialize freely and
this affected the possibility of them creating and expanding their networks.
Cultural and social values impacted women as they restrain them from moving freely, and
owning property, although legally they are allowed to do so and make decisions on their own,
and these restrictions definetely hampered starting and developing businesses and also limited
growth (Nchimbi and Chijoriga 2009; Lowrey, 2006). It was further confirmed that
192
discouraging husbands and society’s negative attitude to women’s capabilities further
aggravated some WECI and that the social context was in some ways unfavourable for women
entrepreneurs (Sospeter, 2014). It was important to consider, as Nchimbi and Chijoriga (2009)
point out, that not all women experienced the same degree of unequal treatment. Institutional
norms mean that society regards the industry as men’s domain where women do not belong
despite the fact that they contribute to household finances as well as the economic development
of the nation. The researcher is of the view that, negative attitudes to and perceptions of WECI
capabilities were a great challenge, which can affect the desire, confidence and motivation of
WECI to develop a venture.
The study also cited husband as a constraint towards starting and developing a business in the
construction industry. This implies that husband may either provide a supportive role or a
constraint. For this case, unsupportive husband was a challenge. Linking to the developing
countries, the contribution is on cultural issues whereby the role of husbands in providing
support to WECI is necessary because there are still wide disparities in terms of access to
resources between men and women as compared to developed countries where equality is
higher than in Tanzania and therefore women don’t usually need much support from their
husbands/spouses.
Analysis of the Intrinsic Barriers/Challenges.
The above discussion dwells on matching the common barriers/challenges found in the cases
in order to develop a better understanding of the business environment of women in the
Tanzanian construction industry. It was found that, WECI were required to do a lot of planning,
organizing, leading, co-coordinating and controlling in relation to all the factors involved in
creating the final product or service. At all these stages they faces challenges. Therefore, it was
very challenging for WECI to effectively delegate, especially those without technical
knowledge, because subordinates in most cases tended to take advantage of them by cheating
in terms of the quality of the work at construction sites and the storage of materials after they
had been procured. The findings are consistent with previous researches which suggest that,
entrepreneurs had to operate in accordance with the cost constraints, quality requirements,
stock control and logistics, in order to make their new venture viable (Rwelamila, 2009; Hakala,
2008; Rosa, 2013). The following Table 2 highlights issues that are consistent with literature
and the emerging features.
Table 2 highlights issues that are consistent with literature and the emerging features in italics.
193
Overcoming financial issues (Hakala, 2008; Nchimbi, 2003; Wangle, 2009).
Negative perception of women’s capabilities
Managing multiple projects (Wangle, 2009; Sospeter, 2014)
Merely being a woman
Lack of managerial capacity (Lowrey, 2006; Gupta et al, 2012)
Winning projects (Hakala, 2008; Verwey, 2006; Arwyard, 2009)

Challenges WECI when developing business
Project location and theft on site (Wangle, 2009; Lincoln, 2010)
Lack of technical education and industrial experience (Wangle, 2009)
Balancing business, social life and family (Nchimbi and Chijoriga, 2009)
Discrimination (Gupta et al, 2012; Arwyard, 2009)
Delay in payments and Corruption (Fakhiri et al. 2012; Lincoln, 2010)
Unsupportive husband
From Table 2, the findings indicate challenges that were consistent to literature and the
emerging ones which are in italics. Emerging challenges were negative perception on women
capabilities, merely being a woman and lack of support from the husband.
4.0 CONCLUSION AND IMPLICATION
Being WECI presented serious financial, managerial, challenges ranging from managerial to
gender such as societal negative perceptions of women’s capabilities, managing more than one
project, especially when the projects were far from the region they lived in, the lack of a
technical education by those who had not received one, project location, obtaining projects,
financial constraints, and balancing the enterprise and family life. Each of these challenges
compounded the effect of the others to start and develop business ventures in the construction
industry. Women may wish to enter joint ventures with other contractors to enhance their
capacity, especially in the early stages of their business ventures. They should be supported by
194
both the private sector and government institutions to realize that they have certain
characteristics that could give them a competitive advantage, which would effectively build
their capacity, instead of depending on external support, even in terms of activities which are
under their control. More importantly, they should aim to undertake technical training/courses
to acquire the necessary construction skills. There is a need for the government to provide
women with a “temporary barrier prevention” to help them enter and start a business in the
construction industry. When they stand alone the prevention may go away. Furthermore, the
government needs to take a lead in promoting an entrepreneurial, risk-taking spirit as well as
providing support structures for these emerging women entrepreneurs.
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Assessing The Entrepreneurship Education And Intention: A Case Of
Open University Of Tanzania
Pamela Liana, Open University of Tanzania,

Department of Marketing and Entrepreneurship, Morogoro, Tanzania
pamela.liana2013@gmail.com OR pamela.liana@out.ac.tz
Abstract
The purpose of this study was to assess the relevance of entrepreneurial education offered at
the Open University of Tanzania (OUT) to students to embark on self employment.
A case study method was employed. Data Collection involved Focus Group Discussions and
an in-depth interview was used to students during exams and face to face sessions at Morogoro
regional centre. Data were analyzed using Critical Discourse Analysis (CDA) and thematic
technique. The study employed the Theory of planned behavior and Entrepreneurship intent.
Findings revealed that entrepreneurship course offered by the University has created a change
of attitude of students towards entrepreneurship and business start ups. Students have shown
capabilities of acquiring entrepreneurial characteristics such as ability to implement ideas,
negotiation and lobbying as an example of one interviewee who practically develop a business
plan and secure loan in a bank. Effects of Social norms and perceived behavior control
emphasize the improvement of the curriculum offered thus to use more pedagogical approach
like Problem Based Learning (PBL) to unleash potentials within students and confidence to
work independently.
The implication is that entrepreneurship education at OUT confirms the need to incorporate
entrepreneurship course to all program offered at the university and is a suggestion to entire
education system in the country
Key words; Entrepreneurship education, intention
1. INTRODUCTION
Entrepreneurial mindset is very crucial to the world economy today due to bigger challenges
that faces many countries such as unemployment and financial crisis. Entrepreneurial mindset
is required for all people of various cultures and discipline to enable entrepreneurial way of
thinking and conduct of oneself. This involves all members of society in public sector, private
sector, business, non-profit organizations and academia. In totality they contribute in managing
198
these challenging situations facing the world, regions and countries today such as
unemployment whereby they can secure self employment. Thus requires education system to
focus on dynamic, rapid and changing environment (UNICTAD, 2011).
According to the (European commission, 2006), United States and others has increased their
focus on entrepreneurial education by encouraging their education system and policy makers
to help facilitate the process.
The important role in imparting students with entrepreneurial skills is to enable a student to
transform these skills to different aspects of life including; self employment, to take
entrepreneurial action and realize outcome by identifying opportunities, creative problem
solving, ability to negotiate, articulate ideas, handling different social situation, thinking and
acting strategically, making decisions under uncertainty, effective communication,
assertiveness and leadership.
Since the main role for universities includes preparing graduates capable of carrying out the
national and regional development and fulfill the labor market needs for both formal and
informal sectors. Recently trends depict an increase in demand of students with soft skills
abilities such as entrepreneurial skills, communication skills, negotiating skills, emotional and
social intelligence. Thus universities are being challenged to produce the well grounded
graduate who has the academic ability combined with the right personality
Entrepreneurship education in Tanzanian higher education institution is offered in two folds.

The first one is as a single programme which results to Bachelor/Master of entrepreneurship
and the second one is a course that can be taught once or twice in an entire degree programme
and non degree programs. Entrepreneurship education at OUT involves student of various
discipline but specifically as a course in a programme.
Entrepreneurial education in Tanzania has emerged from the years 1990’s very differently from
countries like America which was firstly introduced by Harvard University in 1947. This was
due to the socialist era which was against capitalism whereby even civil servants were not
allowed to do business. In EU this has also been the order of the day focusing on implementing
Entrepreneurship Education at higher education institutions in order to develop entrepreneurial
capabilities and minds. The other main purpose being integrating entrepreneurial education in
University program (European commission,2008); impact of Entrepreneur education has
increased the opportunity, to display creativity even at work place and being able to put new
ideas into actions (European Union, 2012).
Entrepreneurship consideration in various African countries has been given much attention of
recently insisting that entrepreneurship education focus on; Awareness of entrepreneurial
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support to enhance those who wish to start a business increase their knowledge on where to
acquire that support (Malebana,2012),.
Self employment incorporated in education system to foster creativity, innovativeness and self
dependence of students. Hattab, 2014, Owusu-Ansah, 2004
Center on producing graduate who are able to seize opportunities, produce students who
achieve mainstream curricular goals by become better learners, and motivated and prepared to
start and develop successful businesses. Olomi (2009).
Despite the fact that entrepreneurship education has been given much attention of recently, this
study focus specifically to OUT students who are basically using open and distance mode of
education, students are far from instructors but very interestingly; their backgrounds are mixed
in the sense that some are employees somewhere, some are self employed, some are neither of
the two. Principally there is a lot to learn here because entrepreneurship is not taught in all
programs and this study is significant to reveal what transpires in these differences. To policy
makers the study contributes in understanding how to unleash potentials within youth in
encumbering unemployment, acting entrepreneurial in a work place and to develop a friendly
environment to venture creations among graduates.
This study is aiming at assessing the relevance of entrepreneurial education in student’s

entrepreneurial intentions at the Open University of Tanzania (OUT).
2. THEORETICAL AND EMPIRICAL LITERATURE REVIEW
2.1 Entrepreneurship education
Entrepreneur is defined by Schumpeter as a person who is willing and able to convert a new
idea or invention into successful innovation, simultaneously creating new products and
business models largely responsible for the dynamism of industries and a long-run economic
growth.
On the other hand (Gibb 2005), defined entrepreneurship as a way of thinking, reasoning and
acting that results in the creation/recognition of these opportunities, enhancement, realization
and renewal of value for an individual, group, organization, or society. There are many working
definitions, but for the purposes of this study, entrepreneurship is defined as “an individual’s
ability to turn ideas into action and is therefore a key competence for all, helping young people
to be more creative and self-confident in whatever they undertake” (EC, 2008).
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Entrepreneurship education has been considered facilitating creation of enterprises, start-up,
educated students, mind set change and create intentions of entrepreneurial orientation (Fayolle,
2004).
Empirical studies were show a discrepancy in their findings were by others considered
educating in entrepreneurship as at making of individuals become more entrepreneurial
(innovative) in their existing firms or work (Henry et al. 2005a, Kirby, 2004; Dreisler et al.
2003) this has been explained more by Hyatt and O’Gorman (2004) that the objective aims at
making individuals take responsibility of their learning and career life. According to
(Bchni,2012; Chiraka,2012; Owusu-Ansah, 2004) the challenges involved in teaching
entrepreneurship is raising of awareness of student to start new ventures, imparting
entrepreneurial spirit, managerial skills needed and grabbing opportunities available in the
society.
Co and Mitchell (2006) asserted that educating for entrepreneurship concentrate on stimulating
the entrepreneurial process, thus to create entrepreneur students need to be motivated to initiate
start-up; (Henry et al 2005) a question as to whether entrepreneurship can be taught; (Hytti and
O’Gorman, 2004) elucidate that the objective is to make stakeholders and society take more
responsibility in life; while (Kirby,2004) advocated on the use of new ventures on their
teachings, (Mwasalwiba, 2010) little have been said on institution environment to which the
graduate are going to operate.
As observed by (Nabi and Linan 2011) Many developing countries are attempting to enhance
the profile and development of business education and graduate entrepreneurship, not as a
means of providing a culture of graduate venture creation and entrepreneurial development but
also to help as an important source of national competitiveness and economic growth
2.2 Entrepreneurial intention
Entrepreneurship intent refers to cognitive representation of a person’s will to perform a

particular behavior that is considered a good predictor of planned and controllable human
behavior (Fayolle, 2007). Other scholars such (Thompson,2009) referred entrepreneurial
intention as a “self acknowledged assurance by a person that they intend to set up a new
business venture and consciously plan to do so at some point in future”. The value of
entrepreneurship education on intention (Shneor, 2014), considering contents of the courses
and delivery pedagogy to encourage entrepreneurial personality development (Linan, 2008;
Hytabb, 2014) increase awareness, confidence and enthusiasm (Van Gerderan et al,2008). The
demand has also been driven by the students themselves, who are eager to take courses ranging
from business planning and start-up, to entrepreneurial finance and technology management.
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2.3 Entrepreneurship Intention Model
Based on the Theory of Planned Behaviour, psychological aspect of a person is considered to

enhance a specific behavior i.e students intention to engage in a behavior that is
entrepreneurship activities which is determined by attitude toward a behavior, subjective norm
and perceived behavior control (Ajzen, 1991). The theory firstly argues that
Attitude is related to the behavioral beliefs and their outcomes, the degree to which a person
has a constructive or destructive behavior in assessment of a behavior. The theory proposes
that an attitude towards an entrepreneurial behavior is very important in perception of
desirability that influences entrepreneurial intention.
Subjective norms which is also referred to as social norms or normative norms; it refers to
social pressure to execute or not to execute the behavior and the motivation to agree in
performing that behavior.
Perceived behavioral control or self-efficacy which can be defined as the perception of relieve
or complexity in the fulfillment of behavior of interest.
Linan (2004) argued that from the perspectives of the theory; students can make decision of
create their enterprise based on three motivational factors which are personal preference or
attraction towards entrepreneurship, perceived behavioural control and the perceived
subjective norms. Most of recent studies has considered entrepreneurship intention with self
employment and venture creation(Linan and chen,2009) .
In Shapero and Sokol (1982) asserted on contextual factors that would act through their
influence on a person’s perception that is consequence of external event depending on
perceived desirability and perceived feasibility. Thus, their proposition based on
entrepreneurial event which basically argues that an individual’s perception of desirability,
feasibility and propensity to act influence his or her entrepreneurial intention. Subsequently
amalgamating the work of these theory as perceived feasibility corresponds perceived
behavioral control, perceived desirability (a result of social cultural influence) being similar to
attitudes and subjective norms.
According to (Shneor, 2014) the two authors suggests an informed intent model in which
existing models are strengthened by incorporating human and social capital variables. These
are viewed as critical sources of individuals in forming entrepreneurial intentions. He further
asserted that human capital comprise of two folds; education and practice which together build
up the cognitive capabilities of individuals to recognize opportunities by joining together those
information which lead to judgments on creating a venture.
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Personal
attitude
Behavior Behaviour
Intention
Subject norms
Perceived
behaviour
control
Source : Ajzen 1991
Figure 1. Theory of Planned Behavior
METHODOLOGY
A qualitative method was employed in this study to respondents who are the undergraduate
students of the Open University of Tanzania (OUT). These students were from the faculties
which teach entrepreneurship course. Data were collected in 2016. Data collection method
involved Focus Group Discussion (FGD) to gain more insight from students’ perspectives on
entrepreneurship education skills and entrepreneurship intentions. On the other hand an in-
depth interview to gain more insight due to dynamicity of FGD. Data were collected during
face to face sessions and during preparation for tests and annual exams in their regional centers.
Two of them excused themselves for not attending since one was being called urgently by her
boss and the other had an emergency at the bank concerning her deposited cheque at the bank.
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Data analysis involved; critical discourse analysis (CDA) and thematic framework analysis.
CDA come across the linkages between language used and the person this means the voice,
intonation and body language. The thematic technique is normally used in interviews and
reports. According to Astride-Stirlling identifies four stages for content framework thematic
analysis such as; developing a coding schedule, organizing coding text, establishing coding
themes and analyzing the themes obtained. Data were initially transcribed there after analyzed.
Table Interview guide for Assessing Entrepreneurship intention of students of OUT (In depth
Interview)
Construct inGeneral Questions
Attitude Do you think that being an entrepreneur will give you any
satisfaction?
If you had an opportunity and resources would you love to start a

business?
Subjective What does your parents, friends or colleagues say about being an
Norm(SN) entrepreneur or self
Perceived Behavior What do you think motivates students to become entrepreneur?

Control (PBC)
What is your opinion concerning venture creation?
Do you think you are able to control creation process of a new

business?
Entrepreneurship If you have no job and no any intention to be employed, would you
Intention (EI) choose self employment? If so why
Think of an event or situation that you have experienced during or

because of the EE programme that drastically changed your heart and
mind to intend to become an entrepreneur
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4.0 DATA PRESENTATION AND DISCUSSION OF FINDINGS
4.1 Respondent’s Profile-FGD
S/N Name of Sex Year of Programe

student study
1 DD F 2 FBM
2 GT M 2 FBM
3 BB M 4 FBM
4 MB M 4 FASS
5 MM F 2 FBM)
6 FH F 3 FBM
7 ME M 3 FED
8 TH F 3 FASS
Source: Researcher. Note: The name of students are not real. FBM=Faculty of Business
Management, FASS=Faculty of Arts Social Science, Faculty of Education
Table above indicates the FGD conducted for four males and four female’s students of the OUT
at Morogoro regional centre. The purpose was to understand concepts and new ideas for
entrepreneurship intention and education to students. In addition In depth interview is
explained in the table below
Discussion of the findings
4.2.1Attitude
Personal attitude toward is associated with behavior belief and their outcomes such as being
attracted to entrepreneurial venture creation believing that you can start it on your own. Other
supporting themes being need to be own boss, manage own time and need for creating
wealth.Being able to seize opportunities around and look forward to utilize resources, this
conceptualization is from the Theory of Planned behavior as proposed by Ajzen (1991). One
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of interviewee said; After I lost my job but still studying at OUT I had to embark to self
employment of which I was having fear of it. I considered what I learnt from entrepreneurship
course that I was able to realize opportunities around me which motivated me to focus on one
of these available opportunities and started taking a step by selling maize from interior villages
in Gairo and sell at Morogoro Town.I found a lot of people doing the same and this was further
revealed as I came in the city finding few customer as the influx was greater beyond the need
of the market. This has also given me zeal to work on this idea and become an entrepreneur.
In addition this correlate with (Owusu-Ansah, 2004; Linan and Chen, 2009; Bchni, 2012;
Chiraka,2012), that attitude change as the crucial part of entrepreneurship education where as
a student has take a step forward to business start up.
4.2.2 Perceived Behavioral Control
The TPB proposed that students can make a decision to create their ventures. To understanding
the practical side of the business needed for starting a venture and how motivation factors can
from (Linan, 2004, Linan2008) where’s from this interviewee who had managed to use
entrepreneurship education and make a business plan as he was narrating here;
Through entrepreneurs I managed to secure a loan from a bank of which I had been selling
Animal leather like cow leather and sell them abroad to China and India. Through
entrepreneurship course I managed to secure a loan at Azania bank. This is because I applied
the knowledge of preparing a business plan whereas I practiced and send my business plan to
bank and luckly it was accepted and although my plan was to acquire 150M I secured 60M of
which the rest was depending on my progress thereafter.
Consequently, themes similar to belief on personal ability, seeking of information, job scarcity,
need for improving life propel decisions to venture creation
4.2.3 Entrepreneurial Intention
In this case the interviewee MM is from a family were both parents are self employed and has
been joining his parents in their day to day activities. The interviewee ME had implemented
idea which was of her own as in entrepreneurship intention models.
I discovered an idea of which I had to collect milk from farmers and sell them to Dar Es Salaam.
My business went well but at a point in time I was duped. This reminded me of an entrepreneur
who has to take risk, I had to gather up myself and start another business as my capital was
severely disturbed. I started selling grinded groundnuts to my network.
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The fact that she expressed and made all effort to become an entrepreneurs, even if is
determined to create a firm in the future. Also supported by these themes; experience, actions,
change of mindset, mentorship, no capital, surrounding environment and knowing resources
available which express a state of mind for venture creation. From (Nabi and Linan 2011, Hytti
and O’Gorman, 2004, Henry et al 2005) entrepreneurship education is not only a means of
providing a culture of graduate venture creation but also a path to intervening ongoing
challenges globally.
4.2.4 Social Norms
Social norms is also referred as subjective norms of which depend on social pressure executed
by the closest ties such as family. This close relation influences to start a venture or no
depending on the power of its pressure. In (Linan and Chen, 2009; Thomson, 2009). In this
case the interviewee MM is from a family were both parents are self employed and has been
joining his parents in their day to day activities (Thompson, 2009 ; Shneor 2014) concur with
the fact that immediate family members, friends and colleague have influence creating and start
up of a venture as explained by interviewer FH;
After completing my entrepreneurship course and realized what to do I talk to my parents who
are civil servants and has never been entrepreneurs. An entrepreneurship course made me to
think of developing my small business to earn my personal cash. I received a lot of opposition
from my parents that they perceive that I might come out with nothing. I had to convinced them
a that I can do it start selling second hand clothes and this gave me relief and zeal to move on
with my business in spite of the fact that my
Also supported by these themes; family background and positively encouraged as pressure to
decision to self employment. This, on the other hand alarming for the need for students to
develop self confidence and practical way of self dependent (Hatabb, 2014).
CONCLUSION AND IMPLICATION
5.1 Conclusion
The purpose of this study was to assess the relevance of entrepreneurship education and
intention at the OUT. Using the Theory of planned behavior and Entrepreneurship intent there
was clear understanding of students entrepreneurship intentions education offered at OUT.
Findings revealed that entrepreneurship course offered by the University has created a change
of attitude of students towards entrepreneurship and business start ups. Students have shown
capabilities of acquiring entrepreneurial characteristics such as ability to implement ideas for
207
an example; one interviewee who transformed theoretical teaching to practically developing a
business plan and secure loan from a bank. In addition university curricular should improve in
imparting some other soft skills which were once less considered such as negotiation skills,
advocacy, communication skills, and presentation skills, emotional and psychological
intelligence. This can be done through improve pedagogical approach towards teaching
entrepreneurship like use of Problem Based Learning. Further study should use quantitative
data to gain more insight through distribution of questionnaire.
5.2 Implication
Policy&Managerial Implication: Policy makers as in Mwasalwiba, (2010) institutional

arrangements deemed to those who opt to engage in self employment and entrepreneurship
activities, and Fulgence (2015) entrepreneurship courses being taught to all program offered at
the university. Policy makers need to make a follow up to introduce entrepreneurship course in
all university assessment and the lower level of education as secondary schools.
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TRACK 4
Sustainable economic development
and the informal economy: lessons
from an emerging market economy
211
Sustainable Economic Development and the Informal Economy: Lessons
from an Emerging Market Economy.
Eghosa Igudia
University of Northampton
Abstract
Anecdotal evidence suggests that most emerging market economies have large informal
economy, which could be stimulated for sustainable economic development. However, the
informal economy, a continuum of economic activities, has individuals operating at different
stages, with those at the bottom fitting into the ‘bottom of the pyramid’ categorisation of
individuals. This paper explores the characteristics of the Nigerian BoP market as a distinct
space within the broad Nigerian economy, and how different economic agents at the BoP
“actively” leverage on the informal economy to enhance sustainable livelihoods for themselves
and their wider communities.
Key words: sustainable development, informal economy, emerging market, BoP
Introduction
Multinational Enterprises (MNEs) bring some benefits to their host countries, especially
developing countries where their (MNEs) role in poverty reduction and growth facilitation is
well documented (see Prahalad, 2005; London et al, 2014). In particular, it is argued that by
providing goods and services that are relevant and practical, MNEs can reduce poverty for
those at the Bottom/Base of the Pyramid (BoP) in developing countries (Prahalad and
Hammond, 2002). (For example, existing products originally meant for the top in terms of
features, size, shape and usage are re-designed and adapted for use at the BoP. This tends to
benefit both the MNEs and individuals at the BoP). This suggests that both ethical and
business-case justifications for MNEs’ operations in a host developing country co-exist.
Evidence in support of this has been reported in the literature (see Kolk et al, 2014; London et
al. 2014; Prahalad, 2005). Particularly, these studies observe that MNEs increase their profit
by selling to customers in the BoP, and in the process alleviate poverty in the host country.
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Practically, BoP Enterprises’ activities span the entire range of formal and informal markets.
In fact the essence of organisations is to seek economic sustainability “and contribute to
alleviating poverty by creating new transactional linkages between formal and informal
markets” (London et al, 2014: 37). However, when it comes to exploring BoP strategies,
emphasis has largely been on the construction of the MNEs and individuals operating in the
BoP as “formal” economic actors/agent. This is further supported by the broad definition of
BoP space in terms of per capita income, the poverty threshold of a dollar per day, or in
reference to the poorest “4 billion” people globally, who subsist on less than a dollar per day.
Beyond seeing individuals at the BoP as passive recipients of “aid” (goods and services) from
BoP Enterprises, this foundational BoP explication views individuals at the BoP as formal
actors (see Prahalad and Hammond, 2002; Prahalad and Hart, 2002; Prahalad and Hammond,
2002).
But BoP consumers also transact within the informal economy (London et al, 2014). The
informal economy has been defined in many ways. London et al, (2014) see it as the subset of
the economy characterised by business transactions that lack adherence to the established rules
and regulations. This corroborates the definition given by the dualist theory of the informal
economy. Particularly, dualism views individuals undertaking activities in the informal
economy as having little or no formal training, low skills, and are employed without any form
of employment contract or protection (Sethuraman, 1976; 1981; ILO, 2002; Braude, 2005; El-
Mahdi and Amer, 2005; Verick, 2006). In relative terms, there is a higher proportion of women,
and self-employed in the informal economy, and participants in the sector have relatively low
level of education, low wages, high level of poverty, and longer hours of working (ILO, 1972;
Tokman, 2001; Becker, 2004; Verick, 2006). These (definitions) suggest that individuals who
engage in economic activity within the informal economy are likely to constitute the “poor”
residents of the BoP. By implication, individuals at the BoP are consumers as much as they are
economic agents, and a more comprehensive approach to applying the BoP concept would be
to consider BoP market as a “space” of economic activity within the informal economy.
London et al (2014) and Schneider (2005) suggest that the context within which BoP actors
operate may differ for both formal and the informal economy, and for countries at different
stages of development. For example, Schneider (2005) reports that the relationship between
the informal economy and economic growth is negative for low-income countries but positive
for industrialised and transition countries. The overall implication is that the characteristics of
BoP economic actors/agents (workers and consumers) and markets are likely to be contextually
different (see Rivera-Santos et al, 2012). In fact, the defining characteristics of BoP markets
may depend on the degree of proximity to or isolation from mainstream markets of individual
at the BoP, and a multiplicity of contextual factors: national, institutional and structural
frameworks/factors.
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Further, very few studies that adopt the BoP approach have focused on describing the
characteristics of BoP markets (Kolk et al. 2014). Thus, a huge gap exists on what we know
about how different BoP markets’ are linked to BoP actors’ characteristics (Kolk et al 2014),
and how the activities of the “poor” in BoP markets (considered as a space of economic activity
within the informal economy) contribute to poverty alleviation and economic growth in
specific Sub Sahara country contexts. The current paper builds on this as its point of departure
and provides a new dimension to exploring informal economies in relation to the BoP market
activities. Specifically, we aim to achieve two objectives in this paper: 1) to establish the
characteristics of the Nigerian BoP markets as a distinct space within the broad Nigerian
economy; 2) to explore how different economic agents at the BoP “actively” leverage on the
informal economy to enhance sustainable livelihoods for themselves and their wider
communities; 3) to discuss, drawing from the study’s findings, implications from objectives 1
and 2 for theory and practice
The remainder of the paper is structured as follows. Section 2 reviews relevant literature, whilst
Section 3 discusses the study’s methods. Findings are presented, discussed in Section 4, and
Section 5 is the conclusion.
Brief Literature Review
Globalisation tends to have changed the way businesses are conducted globally, as new
economic spaces that are neither linked to specific territories, nor subject to state’ controls now
dominate the business landscape (Crane et al. 2014). Arguably, MNEs have become flexible,
powerful, and borderless, and it is becoming easier for businesses to (re)locate to any country,
as well as sell their goods and services in the international market from their borderless
locations (Crane et al. 2008). Adding to that, there is a growing debate about the role of MNEs
in addressing poverty, which gained further momentum by the introduction of the Bottom of
the Pyramid (BoP) concept into the literature in the late 90s/early 00s (see Prahalad and
Hammond’s, 2002). Thus, it is possible for MNEs to grow their profits as well as help lift
billions of people at the base of the economic pyramid out of poverty by doing business with
them (Prahalad and Hammond (2002).
A core assumption of the BoP idea is that businesses can make profit by selling to the poor and
at the same time do “good” by lifting the poor out of poverty. Along this line, the BoP approach
and strategy is a call on MNEs to engage with individuals at the BoP on a win-win basis; doing
good and being profitable. This is however still contentious, as debates about BoP approaches
and definitions have continued in the literature (see London et al, 2014; Karnani, 2011).
Specific to these is the debate on whether MNEs should be searching for a fortune at the BOP.
This very idea has been questioned by proponents of the BOP (see London et al. 2011) as well
as critics (see Karnani (2011).
214
Kolk et al (2014:346) note that studies adopting the BoP approach focus majorly on four areas:
the first cluster pertains to studies that focus extensively on offering advice and strategy to
firms wishing to enter the BoP market; the second cluster covers those that evaluate and critique
BoP initiatives, ideas; the third cluster covers studies that report cases of initiatives with the
aim of discussing suitable products for the BoP markets, and the final cluster pertains to those
that focus on describing the characteristics of BoP markets. While Clusters 1 to 3 have received
high attention from researchers, Cluster 4 has not. This is surprising considering that studies at
Cluster 3 should be underpinned by findings from Cluster 4. Capturing this, Kolk et al (2014)
observe that, not many studies have adopted the focus of the fourth cluster despite an apparent
connection between the focus of the third and fourth clusters, considering that
recommendations of suitable products for BoP markets ought to be based on an understanding
of the BoP market(s).
This clear disconnect between knowledge of different market characteristics and

recommendations for such markets have been used extensively in the literature. To close the
gap our paper argues that a full understanding of the characteristics of the actors/agents at the
BoP is paramount to a comprehensive understanding and conceptualising of the BoP concept.
Methods and Data
The current study employs quantitative data, 597 responses to a questionnaire administered to
about 1200 participants in the Nigerian informal economy. Two methods were employed for
the data collection: a “street-by-street survey” (Reddy et al. 2003:137), and the spatial random
sampling method (Williams and Round, 2009). While the former involves administering a
survey instrument to members of the public, the latter involves selecting every alternate
location and participant for sampling. The data gathering exercise took place between May
2012 and March 2013 across 5, out of the 6, regions (covering 23 of the 36 states) in Nigeria.
Nigeria is the most populated and largest economy in Africa. Anecdotal evidence shows that
Nigeria has a very large and dynamic informal economy which shares similarities with those
of other countries in the West Africa sub-region. Therefore, focusing on Nigeria as we do has
the potential of uncovering key characteristics of BoP markets and activities in the informal
sector of these economies.
We analyse collected data at three distinct levels: identifying key variables (i.e., respondents
level of income and education, gender, age, marital status); determine the proportion of
respondents that qualify as BoP actors by employing the income levels that are lower than the
national minimum wage of 18,000 naira (this corresponds to about 2 dollar/day; although
higher than BoP definition, but less than legally recognised living wage in Nigeria); and
consider the nature of economic activities that BoP respondents engage in to ascertain the
agent/actor related characteristics of BoP markets.
215
Preliminary Findings/Discussions
BoP markets contributes a lot to the Nigerian economy. While we know this to be true for the
informal economy, our study highlights that the extent of contribution are tied to market
characteristics, actors and nature of activities, e.g., individuals undertake economic/business
activities in the informal economy to augment income earned from government/private sector
formal job. Hence the informal economy provides a platform for individuals/actors to transit
from traditional BoP (income levels consistent with minimum wage) to Post-BoP (more stable
income levels above minimum-income levels)
In line with our objective of unraveling the characteristics of individuals at the BoP, this paper
also sheds lights on two contested questions: are people poor because they engage in the
informal sector? Or do people engage in the informal economy because they are poor?
Preliminary findings show that some 28% of actors engage in the informal economy because
they are poor (e.g., the people that engage here to augment income levels and those that cannot
get government jobs that guarantee the minimum wage. On the other hand, the nature of activity
undertaken in the sector by actors and the nature of existing institutional frameworks (e.g.,
difficulty in obtaining credit or financing from banks in Nigeria because they have no collateral
– again because they are poor) could restrict the former to the informal economy (and
correspondingly restrict them to BoP). This is why majority of these participants opt for
government jobs since this guarantees minimum wage but keep them in the BoP space of the
informal sector.
Finally, preliminary results show that a high proportion of respondents move from BoP to
higher income levels. Specific to this is that informal markets become avenues where over two
third of participants are able to lift themselves out of BoP, creating sustainable livelihoods for
self and contributing further to GDP (e.g., via the different forms of levies they pay, and jobs
they create).
Conclusions
This paper’s11 preliminary results show that the Nigerian BoP market is large, distinct and
contributes to the growth of the Nigerian economy. Particularly, results show that some
Nigerians are able to scale-up from the BoP space to higher income levels. Although quite
premature, there are reasons to believe that economic agents at the BoP in Nigeria can “actively”
11
Please note that this paper is at its early stage. We welcome critique that can improve the quality of the
paper.
216
leverage on the informal economy to enhance sustainable livelihoods for themselves and their
wider communities.
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Economic Integration and Multilateral Trade Gains: An examination of

the Implementation of the East African Community (EAC) Common
Market Protocol
Caroline Ntara
Kenya Methodist University, Nairobi, Kenya
caroline.ntara@kemu.ac.ke
Thomas Senaji
Kenya Methodist University, Nairobi, Kenya
219
thomas.senaji@kemu.ac.ke
Abstract
This research examines economic integration and multilateral trade in the East African
Community (EAC). In particular, the study investigates the slow pace of implementation of the
common market protocol. The integration of the EAC is crucial to the economic, social, and
political welfare of its Member states. In this paper, we examine the implementation of the
East African Community (EAC) Common Market Protocol and the associated multi-lateral
trade gains. This paper looks at empirical literature to identify the likely impediments to the
implementation of CMP. A review of literature suggests that infrastructure weaknesses,
divergent macroeconomic structures and policies, poor monitoring of bilateral negotiations,
Contrasting production structures and limited institutional domestic capacity are likely causes
of the slow implementation. It is proposed that empirical investigation be launched to test the
five propositions presented in this theoretical paper regarding the impediments to the
implementation of the CMP and its contribution to multi-lateral trade gains. The findings would
inform actions to accelerate EAC integration.
Keywords: Multilateral trade, Common Market Protocol, Integration, East African Community
Introduction
The East African Community (EAC) comprising Burundi, Kenya, Rwanda, Tanzania, and
Uganda, marks one among many of the attempts of East African countries to unite. As far back
as the colonial period, these countries sought social and economic integration through the
construction of the Kenya-Uganda railway in 1897. Several other institutions were established
as part of the efforts towards the creation of the first East African union. They were the Customs
Collection Center (1905), East African Currency Board (1905), East Africa Postal Union
(1905), Court of Appeal for Eastern Africa (1909), Eastern Africa Customs Union (1919), East
African Governors Conference (1926), East African Income Tax Board (1940), and Joint
Economic Council (1940). Some joint organizations – the East Africa High Commission (1947),
East African Common Services Organization (1961), and East African Community (1967) –
were formed to manage the affairs of East African countries and regulate their industrial and
commercial relations (Okello & Kirungi 2011).
Unfortunately, the East African Union did not last. One consequence was the collapse of the
first EAC in 1977 due partly to ideological differences and political upheavals in and among
the countries. Nevertheless, East African countries persisted with their desire for regional
integration. Nearly two decade later, in 1992, attempts to revive the EAC commenced, leading
to the formulation of the Treaty for the Establishment of the East African Community in
November 1999. Kenya, Tanzania, and Uganda signed the treaty, which was effected in July
220
2000, signifying a key milestone in the revamping of the regional integration project. In 2001,
the EAC was inaugurated. Burundi and Rwanda expressed their interest to become partner
states. In June 2007, they became signatories to the EAC Treaty and full members in July 2009.
The purpose of the second EAC was to improve cooperation among the member states with
the aim of maximizing their economic, social, and political gains. It was perceived as a means
of enabling the signatories to enjoy increased market access and trade levels while
strengthening their economies in the face of globalization challenges (Okello & Kirungi, 2011).
The implementation of the CMP is a path to realize job creation and economic growth in the
region. The free movement of workforce is similarly critical to the EAC integration process.
However, despite the CMP being in place since 2010, the anticipated benefits for EAC citizens
are yet to completely materialize. Partner States have not yet harmonized their internal work
permit procedures to make room for provisions of equal treatment to EAC citizens
(International Trade Union Confederation, 2014)
Problem Statement
All regional integration initiatives and agreements face problems (Odhiambo, 2011). Currently,
there is a problem of implementation of the East African Common Market Protocol. According
to a press release by the East African Community dated 15th February 2013,
“All five partner states are lagging behind in implementation. The Council of Ministers and the
Summit of the EAC Heads of State are concerned about the slow pace of implementation of
the Protocol. Partner states are yet to harmonize their national laws to conform to the common
market protocol. In addition, there is no common understanding and interpretation of indicators
for critical areas of the common market protocol that affect trade. Some of these areas are free
movement of services, free movement of goods and free movement of capital (p. 2).”
Another source of concern is the EAC’s shift of focus from implementing the Common Market
Protocol to having a monetary union (Oluoch, 2014). The EAC member states need to
understand that the achievement of a monetary union and common currency depends upon the
establishment of a single central bank and sound economic and fiscal policies that must be
harmonized. For this reason, priority should be accorded to the implementation of various
functions of the Customs Union to permit goods, ideas and labor to flow freely. The EAC
integration has a central goal of trade facilitation in the region and the slow pace of
implementation is identified as a major impediment to the achievement of multilateral trade
gains among EAC member states. However, there is scarce empirical literature on the exact
aspects of the slow implementation of the EAC common market protocol.
Literature Review
221
As part of their conceptual and empirical analyses of regional trade agreements (RTAs), Das,
Edirisuriya, and Swarup (2012) examine some of the policy implementation issues involving
these agreements. They include unfair trade practices such as dumping, circumvention of rules,
lack of harmonized customs codes, valuation, and procedures among RTA signatories, and e-
implementation challenges. Das et al. (2012) propose a three-step approach of boosting the
implementation of RTAs. First, rules should be well-formulated with clearly defined provisions
or measures. Second, implementation mechanisms ought to be simplified by using information
technology (IT) with online-embedded, customized software that can secure data sharing. Third,
signatories who circumvent rules and commit infringements should be subjected to
surveillance and penalties.
In his examination of regionalism in East Asia, Pomfret (2011) notes that bilateral trade
negotiations and agreements have mushroomed in the Asia-Pacific region but their
comprehensiveness and actual implementation are restricted. He discusses some of the issues
that have hampered the smooth implementation of the ASEAN-China Free Trade Area (FTA).
He mentions the slow and partial progress of negotiations between ASEAN and Japan and
Korea, exclusion of sensitive items, and anti-Chinese sentiments (several ASEAN signatories
are afraid of Chinese goods swamping the main sectors of their economies). Pomfret adds that
many agreements lack serious content and monitoring the progress of the bilateral negotiations
is difficult. Implementation costs may be increased by variations in the regulatory regimes of
partners and language difficulties. Further, according to Pomfret, selective coverage and lack
of transparency cause trade-creating opportunities to be overlooked as they hurt local producers
while trade diversion is allowed because it will not be harmful to domestic producers.
In their discussion of the progress, challenges, and future directions of special economic zones,
Farole and Akinci (2011) point out some of the factors that influence the effectiveness of RTAs.
They cite comprehensiveness and the extent of liberalization as the most important. They add
that successful RTAs address all trade-enhancing measures rather than merely focusing on
tariffs. In this light, intellectual property rights and the simplification and harmonization of
rules and procedures must be given consideration. RTAs must not be subject to overlapping
tariff schedules and rules of origin as these complicate trade relations and hinder member
nations from integrating into global partnerships. They should also be designed in conformity
with the economic reforms of partner states (Farole & Akinci, 2011).
Gray (2014) conducted a study on the implementation challenges facing RTAs. She observed
that many RTA institutional features were unimplemented, despite their global similarities.
These features include dispute settlement strategies, legal language, and political, economic,
and social goals. Gray also found that most RTAs failed to deliver what they promised,
reflecting an implementation gap that has remained unexplained. She attributed this issue to
shortcomings in countries’ physical and institutional domestic capacity. Thus, RTA
222
implementation is difficult in nations with inadequate infrastructure and disrespect for the rule
of law. Such countries cannot fulfill their obligations as outlined in RTAs.
Rusuhuzwa and Masson (2013) evaluated the intentions of the EAC to establish one currency
for its partner states and how this could best be achieved. They noted that this plan could be
hampered by differences among EAC members, such as contrasting production structures and
fiscal convergence criteria. These variations are some of the issues cited as impediments to the
fast and successful implementation of RTAs (Gray 2014; Farole & Akinci 2011; Pomfret 2011;
Das et. al. 2012; Odhiambo 2011; Omilola 2011; Mutai 2011; Kimbugwe et. al. 2012).
Rusuhuzwa and Masson concluded that EAC partners required effective surveillance and fiscal
discipline mechanisms as part of their preparations for establishing a monetary union.
Mafusire and Brixiova (2013) conducted an empirical investigation into EAC countries’
readiness for a single monetary union. Like Rusuhuzwa and Masson (2013), their findings
indicated that plans to create such a union were rushed and ill-timed because EAC partner states
suffer from infrastructure weaknesses and have divergent macroeconomic structures and
policies. They concluded that a monetary union should only be considered after infrastructure
has been boosted and fiscal and economic policies have been harmonized. The challenges
highlighted in the study are similar to those mentioned by other researchers as barriers to the
adoption of RTAs (e.g., Gray, 2014).
Purpose of the study
Existing studies (e.g., Tumwebaze & Ijjo 2015; Ebaidalla & Yahia 2013; Melo, & Tsikata,
2014) examine the effects of RTAs on trade flows of member states and challenges hindering
their implementation and success. However, research is yet to be conducted on the issues
underlying the slow pace of implementation of the EAC Common Market Protocol and how
this affects multilateral trade gains within the EAC. Based on an extensive literature review
this paper sought to address this gap and add onto the larger corpus of studies on regional trade
agreements by highlighting propositions for further research.
Methodology
This conceptual paper uses secondary sources from already published content on regional
integration (e.g., United Nations Conference on Trade and Development; The Economist 2013).
The paper identifies the issues highlighted in previous research and looks at gaps that would
cause the slow pace of implementation of the CMP in the East African Community. The studies
reviewed highlight several key issues that might be the cause of the slow pace of
implementation of the CMP. The issues highlighted in the studies inform the conceptual model
and propositions presented in the study.
223
Conceptual model
We now present a conceptual model Figure 1 showing the possible antecedents of the
implementation of the EAC CMP as follows:
Physical infrastructure
P1
Divergent P2
macroeconomic
structures and policies Implementation of CMP
P3
Monitoring of bilateral
negotiations P4
Contrasting production
structures P5
Institutional domestic
capacity
Figure 1. Conceptual model
The model indicates the antecedents (physical infrastructure weaknesses, divergent

macroeconomic structures and policies, monitoring of bilateral negotiations and limited
institutional domestic capacity) while the dependent variable is the pace of implementing the
CMP. The implementation of the CMP affects multilateral trade gains that member countries
are bound to benefit from, once fully implemented.
224
Infrastructure weakness has been cited as an impediment to multilateral trade gains in the EAC
region where the EAC member states have poor infrastructure which slows down movement
of people, commodities, capital and services as asserted by Eyster (2014) that:
“An issue that will create numerous problems if not partially resolved is that of the
underdeveloped and crumbling infrastructure networks of EAC nations. Without adequate
infrastructure, the lofty goals of economic development and integration will largely be for
naught, as goods and people remain difficult to transport and businesses are left without vital
services. The development of port facilities has been ongoing and successful, but inland
transport routes are outdated and inefficient. Road systems are viable surrounding the EAC’s
largest metropolitan areas, but dirt paths abound in the more rural areas of the region. Further,
rail systems have not been upgraded for decades, and are in sore need of rehabilitation (p. 31). ”
In addition, the EAC member countries have divergent macroeconomic structures and policies.
This shows that their fiscal and monetary policy measures differ making the implementation
of the CMP a difficult task. Mafusire and Brixiova (2013), indicate that there is no convergence
in macroeconomic structures in the EAC. They add that there is need to have reforms geared
towards harmonization of these policies in order to synchronize business cycles. Furthermore,
bilateral negotiations among member countries are not monitored to check on progress. Reith
and Boltz (2011), say that the East African Community is tough on paper, but feeble in the
discharge of its decisions. The community is extremely ambitious on integration but does little
to make its efforts a reality on the ground. This leaves a gap that explains the slow pace of the
implementation of the CMP effectively slowing down the achievement of multilateral trade
gains.
Empirical literature also suggests that contrasting production structures affect the
implementation of the CMP. According to Rwigema (2014), the EAC nations are on occasion
perceived as too small to provide considerable domestic markets for light and heavy industrial
goods produced by methods intended for large scale production. This forces them to adopt
ineffective production techniques or to ditch industrialization. These countries are frequently
competing with each other in global markets, considerably reducing their bargaining power in
intricate industrial markets. This affects the attainment of multilateral trade gains in the region.
Mafusire and Brixiova (2012), add that production asymmetries of the EAC member states
slow down the deepening of regional integration efforts.
In conclusion, limited institutional domestic capacity leads to the slow pace of the
implementation of the CMP. Mathieson (2016) indicates that the EAC has limited authority
and capacity to monitor the implementation process which is faced by numerous challenges.
The institutional capacity of the EAC is low and its institutional arrangements are yet to be
updated to deliberate on the increasing scale of the EAC’s goals. Additionally, it seems that
225
member states do not agree with the proposed institutional arrangements geared towards
providing more capacity, an issue which the EAC Secretariat is determined to achieve, but
some member states governments seem to be in opposition.
Therefore, we suggest the following propositions;
Proposition1: Infrastructure affects the implementation of the CMP such that the poor the
physical infrastructure development the slower will be the implementation and vice versa
Proposition 2: Macroeconomic structures and policies affect the implementation of CMP such
that the more divergent they are the slower will be the implementation and vice versa
Proposition 3: Monitoring of bilateral negotiations would positively contribute to the

implementation of the CMP such that the more effective the monitoring is the higher the
chances of CMP implementation
Proposition 4: Contrasting production structures influence CMP implementation such that the
less contrasting the structures are, the faster will be the implementation of CMP
Proposition 5: Institutional domestic capacity positively influences the implementation of CMP

such that the more limited this capacity is, the slower will be the pace of implementation of the
CMP .
We therefore posit that physical infrastructure, macroeconomic structures and policies,

monitoring of bilateral negotiations, institutional domestic capacity, and contrasting production
structures are antecedents of the CMP hence its contribution to the multilateral trade gains in
the EAC. Consequently, we suggest that empirical investigations be launched to test these
propositions and generate results that would guide the full realization of the EAC integration
by prioritizing the relative contribution of each of the antecedents of CMP.
Conclusion
The effective implementation of the protocol will result in a number of benefits for EAC
member states citizens. These include access to a variety of goods and services, low prices
because of increased competition, opportunities to sell goods and services in areas with the
highest returns, and improved regional attractiveness. A large integrated market will facilitate
intra-EAC and foreign investment, allowing companies to reap the gains of serving a larger
market due to the integration leading to sustained investment which will reduce unit costs of
region-wide transportation and communication while enhancing economic diversification and
226
growth. These benefits will be difficult to realize if there are issues hampering the rapid and
effective implementation of the CMP hence the need to empirically examine its antecedents.
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TRACK 6
Human Resources, Management and
Organization
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231
Lead: Leadership Effectiveness: Egypt’s Case
Dr. Elham Metwally, Adjunct Assistant Professor, School of Business, The American
University in Cairo, ekm@aucegypt.edu
Abstract
This paper examines leadership effectiveness in Egypt being a crucial factor influencing the
performance of organizations. In Egypt, a third world developing country, the public sector
suffers modest performance due to the influence of cultural factors, leadership traits,
motivation, as well as other practices. This paper presents the results of two Delphi rounds that
were conducted in Egypt to examine aspects of culture, leadership, and motivation, an area of
research that has been ignored in the past, particularly in the literature of developing countries.
The findings of the paper provided useful information and added value to the management and
leadership fields for academics, executives, and the community in general.
Introduction
This paper focuses on leadership effectiveness in Egypt, as a factor that has a significant
influence on an organization’s performance and strategic success. Being a third world
developing country, the Egyptian public sector is suffering poor performance in many areas
due to the influence of cultural backgrounds, leadership traits, practices, sources of motivation
to work hard and succeed, and so on. This paper presents the results of two Delphi rounds that
were conducted in Egypt to examine aspects of culture, leadership, and motivation, an area of
research that has been ignored in the past, particularly in the literature of developing nations.
The findings of the paper provided helpful information and added value to the management
and leadership fields for academics, executives, and the community in general. We discovered
that most of the participants agreed on most of the leadership traits and motivators inthe Delphi
first and second round of the study.
Literature Review
A review of the literature on effective leadership behaviors revealed that the main approaches
to leadership included Leadership traits, behaviors, contingency, and transactional and
transformational leadership styles. Trait theory focused on identifying the specific physical
characteristics and personality attributes that are linked to effective leaders. Good interpersonal
skills, confidence, persistence, integrity, honesty, and creative problem solving skills were
some of the traits identified. The behavioral approach focused on understanding describing
what leaders do and the impact of their actions. Also, it helped explain leadership behaviors in
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the light of two leadership dimensions: task or relationship-oriented, and emphasized the need
for leaders to balance successfully these two types of behaviors. Contingency approaches
focused on understanding the circumstances or situations where leadership behaviors and styles
will be effective (Yukl, 2010). Transformational leadership defined transformational leaders as
those that are able to inspire individuals to achieve goals beyond expectations (Yukl, 2010),
and identified four components of transformational leadership: charisma or idealized influence,
individualized consideration, intellectual stimulation and inspirational motivation.
Transformational leaders, on the other hand, are less concerned with inspiring employees as
their main focus is on motivating employees to reach certain performance levels and meet task
objectives, in return for rewards (Lekka, C. and N. Healey, 2012).
Some studies (Kotter, 2001; Peters, 2002; and Zaleznik, 1992) discussed the importance of
both leadership actions and managers’ skills and their impact on organizations’ performance
and effective management of change. A correlation was found, for example, between
successfully aroused need for change, or motivation for change, and greater commitment to the
agreed upon plan of action that influenced the success of radical changes and transformation
in organizations (Anderson & Anderson, 2003; French, Bell & Zawachi, 2000; Kotter, 1995,
1998; Tichy & Sherman, 1993).
Some studies revealed that managers who were able to demonstrate competencies in
management of change through effective knowledge of change processes and change
management skills, such as interpersonal skills, teaming skills, communication and persuasion
skills, and creative and innovative thinking, and so forth, were perceived as effective in
managing organizational change (Brynjolfsson, & Yang, 1997; Brewster, Carey, Dowling,
Grobler, Holland, & Warnich, 2000: 221-222), as this influenced the organization’s culture and
eventually enhanced organizational commitment. As Hitt et al (2001: 489-490) noted: “A
firm’s ability to achieve strategic competitiveness and earn above-average returns is
compromised when strategic leaders fail to respond appropriately and quickly to changes in
the complex global competitive environment”, and “strategies cannot be formulated and
implemented to achieve above-average returns without effective strategic leaders.” According
to Hatem and Hearn (2003) an individual’s degree of cultural competency can lead either to
the success, enhanced effectiveness of persons, or can lead to limited career opportunities, and
disappointment, particularly when people are unable or unwilling to recognize and appreciate
other cultures’ values, beliefs, and differences. However, to be aware of other cultures’ values
and beliefs, one has to be first aware of his own culture’s values and assumptions.
Africa is the home to many successful leaders like Nelson Mandela, Kwame Nkrumah, Steve
Biko, and Julius Nyerere. The African community introduced Ubuntu, which is a belief of a
universal bond of sharing with all humanity. Ubunto resulted in leaders feeling responsibility
towards others as an essential emotion. According to the CCL researchers, who analyzed the
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leadership strengths and weaknesses in part of Africa, leaders ought to learn how to lead diverse
environments, and create solutions for times of scarcity of resources. They have also found that
in Egypt and West Africa, leaders have problems with decisiveness, straightforwardness, and
composure, but they go by the goal of doing whatever it takes to achieve their goal (Eckert and
Rweyongoza). Being a third world developing country, the Egyptian public sector is suffering
poor performance in many areas; mostly due to the influence of cultural backgrounds,
leadership traits, practices, sources of motivation to work hard and succeed, and so on. On the
management side, managers lack global insight and keep the local status quo that is not capable
of adapting to changes and global standards and techniques that are applied several years back
in developed countries. This is due to many reasons that include, but are not limited to:
insufficient budget for training, workplace politics, and a culture that is not a stimulant to
change or enhancing leadership skills and competencies, the latter being our focus of attention.
Egypt, an ancient civilization, a nation of more than 83 million people, according to July 2012
estimates (The World Fact Book, 2012), is geographically situated in North-East Africa. Egypt
is the second-most populous on the African Continent. The Egyptian population is quite
homogeneous (Mbendi 2002:1-3). Egypt has used its exceptional location, to position itself
and play an important role in the area, and to become a major gateway to Africa and the Middle
East
(Egypt’s Year Book 1999). The Egyptian culture has been influenced by many factors: its rich
ancient history, a long history of colonialism, several wars, and its executive power that has
rested for years and years in the hands of a President who traditionally has been elected in
single-candidate elections for about thirty years.
Another aspect that had a large impact on culture was the major changes that occurred in
Egypt’s economic system. During the ‘50s and ‘60s Egypt adopted a socialist approach that
turned privately owned enterprises into state-owned ones, and decisions were centrally taken,
thereby influencing the Egyptian mindset, behavior and culture. And though in the mid ‘70s,
Egypt adopted the open-door policy, that embraced western culture thoughts through education,
joint development programs, and joint venture agreements, (Metz 1991: 1-8), still it was
difficult to get rid of the management mindset that prevailed in prior times during the times in
which socialist approach existed.
As no studies were identified that attempted to link leadership effectiveness theories with
effectiveness leadership in Egypt, we thought it could be interesting to find out the applicability
of the above-mentioned theories. Therefore, the purpose of this study is to explore leadership
traits and attributes and their effectiveness in Egypt.
Methodology
234
Delphi Process – First Round
In Egypt, we conducted two Delphi rounds to explore those aspects of culture, leadership, and
motivation that influenced leadership effectiveness in Egypt. As such, we distributed the
Delphi survey to 112 persons, residing in Cairo city in Egypt, out of which only 79 responded
with a response rate of about 70%. Then, we distributed the second round of the Delphi survey
to the 79 persons who undertook the first round. Out of those, 77 responded with a response
rate of about 97.4%. In distributing the survey, we depended entirely on emails, and the
network of participants. The sample used was a purposive sample, which is used to collect
information by targeting a specific group that can provide the desired information (Wimmer &
Dominick, 2003: 85-88). As such, participants in the study were managers, students studying
for their Masters degree in Public Administration, and students studying for their undergraduate
degree in Business Administration, and thus were best suited to answer the issues discussed in
the questionnaires.
Results
Demographics
Participants were graduate and undergraduate students studying for an MA in Public

Administration and a BA in Business Administration respectively, as well as employees from
different professions and occupations that included banking, NGO’s, administration,
procurement, student affairs, etc. and with varied educational backgrounds that included:
journalism and mass communication, computer science, engineering, business, and business
administration. The age of participants ranged from 19 to 59 years, and 35.5% of the
participants were males; whereas the rest were females. Out of the 79 participants, only eight
was not born in Egypt; whereas, two abstained from identifying where were they born.
Ethnic or cultural background
Figure 1: Words that Describe Culture in Egypt:
235
45
40 1- Relatively
35 Unimportant
30
25 2- Moderately
20 Unimportant
15
10
5 3- Neither
0 Important/Unimportan
t
4- Moderately
Important
When asked about aspect of culture that contributes to being effective leader in the Egyptian
community, most of the participants, 62%, believed that education is very important and that
it contributes highly to the effectiveness of the leader. (Figure 2).
Figure 2: Aspect of Culture that contributes to being effective leader in the Egyptian
community:
50
40
30
20
10 Social Level
0
Financial
Stability
Education/
Well educated
The following words/terms (Figure 3) were used to describe an effective leader in the Egyptian
community. Fairness, honesty, understanding were important traits that described effective
leaders.
Figure 3: Words/terms that described an effective leader in Egypt:
236
50
45
40 1- Relatively Unimportant
35
30
25
20 2- Moderately Unimportant
15
10
5
0
Commitment/De…
3- Neither
Fair
Humour
Work with Others
Understanding
People person
Perseverance
Knowledgeable
Honest
Important/Unimportant
4- Moderately Important
5- Very Important
Effective Leader
And, the following words/terms, see figure 4, were used to describe what motivates leaders or
managers to succeed in the Egyptian community. Justice was very important to participants as
a motivator, and was followed by financial rewards and then community service.
Figure 4: What motivates leaders to succeed:
35
30 What motivates leaders to
25 succeed Community/
20 Society
15
10 What motivates leaders to
5 succeed Justice
0
What motivates leaders to

succeed Money/Wealth
The following words were used to describe what motivates employees in the Egyptian
community to work hard. Extrinsic rewards were important and were followed by acceptance,
pride, the need to help the community, and finally volunteer (See Figure 5).
Figure 5: What motivates employees to work hard:

237
40 1- Relatively
Unimportant
30
2- Moderately
20
Unimportant
10
3- Neither
0 Important/Unimporta
nt
4- Moderately
Important
When participants were asked to name three to five people, men or women, whom you consider
to be, or to have been, effective leaders, 22% considered Nelson Mandela; whereas, 15.6%
mentioned Martin Luther King, and Barak Obama, 18% believed Mahatma Ghandi, and 13%
thought Anwar El Sadat were effective leaders. Other names that were mentioned as effective
leaders included, though not limited to: Azza Fahmy, Ahmed Zoweil, Magdi Yaacoub, Hoda
Shaarawi, Bill Gates, and Hitler.
Discussion
After running the two delphi survey rounds the following were findings:
Demographics
Participants of both Delphi rounds were from different professions, their age ranged from 19
to 59 years, the majority, around 65%, were females, and the majority was born in Egypt
(around 89%).
Ethnic or cultural background
In the first round, when asked about five words to describe their ethnic or cultural background,
most participants agreed on three words: Moslem, Arab, and Egyptian. And, in the second
round, when participants were asked to say words to describe their culture, the majority
believed that it is a culture that values religious beliefs and behaviors, social behaviors,
relationships among people and interaction. Thus, our findings highlight the importance of
religion in the Egyptian culture, which is in agreement with Mbendi’s 2002:1-3.
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Effective Leader’s Traits
When asked about words to describe effective leader’s traits, most participants agreed on:
charismatic, strong personality, good communication skills, vision, creative, and enthusiastic
characteristics. In the second round, most of the participants in the survey also believed that
good education contributes highly to being effective leader in the Egyptian community.
Therefore, our findings highlight the importance of educational background and experience to
effective leaders, which aligns with previous studies of Kotter, 2001; Peters, 2002; and
Zaleznik, 1992.
Doings of an effective leader
When asked, what does an effective leader do? Eight out of ten said he/she should help group
members perform well, five said that he should have a vision, and four said that he should set
goals and standards. In the second round, participants gave greatest importance to fairness,
honesty, and understanding. Thus, our findings highlight the importance of the honest and fair
role the leaders play and their support to subordinates, which agrees with earlier studies of
Brynjolfsson, & Yang, 1997; Brewster, Carey, Dowling, Grobler, Holland, & Warnich, 2000:
221-222.
What motivates leaders to succeed?
When asked about what motivates leaders to succeed, almost half of the participants said that
leaders are self-motivated, and most of the rest said that they must feel influential to the
organization to be motivated. And in the second round, justice was the most important
motivator then came extrinsic benefits like money/ wealth, and equally came community and
society service. Thus, our findings highlight the importance of intrinsic rewards and then
extrinsic ones in the Egyptian culture, which is in alignment with Hitt et al (2001: 489-490).
What motivates employees to work hard?
The majority of participants, about 75%, believed that feeling important and appreciated
motivates people. However, in the second round, extrinsic rewards were perceived as very
important to motivate people; whereas, community acceptance and pride were moderately
important and unimportant, which agrees with the study done by Hatem and Hearn (2003).
239
Conclusion and Implications
In conclusion, leaders in Africa are required to adapt to diverse cultures, pay attention to
economic instabilities, and adapt to changing situations. Whereas most of the participants
agreed on most of the leadership traits and motivators in the Delphi first and second round of
the study, there was no consensus among them with regards to what motivates employees to
work hard, and differed greatly in their answers when asked to nominate three to five people
whom they consider to be, or to have been effective leaders. Appreciation towards employees
gave the highest response. Also a leader should be influential to the organization.
This study has identified some notable gaps in relation to leadership effectiveness in Egypt,
which proposes several potential opportunities for future research and exploration both on the
academic and professional levels. Precisely: Participants identified political leaders as opposed
to other leaders in different disciplines when they were asked to mention names of people who
in opinion are leaders. Exploring the reasons behind this is highly recommended.
The majority of participants mentioned words describing ethnic or cultural background like
Moslem, Arab, and Egyptian, religious, conservative, traditional, historical, and having sense
of humor; whereas, very few described Egyptians cultural background as “African”. This
requires further research to explore reasons behind not putting the greatest emphasis on the
“African” identity since Egypt is a North African country.
The Egyptian culture is negatively perceived by many participants, which proposes

opportunities for further research on understanding cultural differences among Egyptians
across different social classes and occupations to gain more insights and agreement about
cultural perceptions.
When asked about aspect of culture that contributes to being effective leader in the Egyptian
community, 62%, believed that education is very important and that it contributes highly to the
effectiveness of the leader. This information could be useful for both academic and professional
experts as it gives important insights to possible prospective developments that could improve
the educational system in Egypt, in particular in public institutions towards supporting more
effective future leaders.
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242
Transport Business Sustainability: A Review Of Succession Planning For
Family Transport Business
Emmanuel M. Tonya
emmanuel.tonya@out.ac.tz
Matern A. Victor
matern.victor@out.ac.tz
Abstract
In the context of business, succession involves the transfer of leadership for the purposes of
continuing operations. This paper’s goal is to address the importance of succession planning in
relation to transport business sustainability. It is revealed that, Succession is based on culture
and customs, that one is selected from the family members to take over the business regardless
of competence and experience which lead to business sustainability failure. The Study shows
the factors of succession includes culture setup, lack of succession planning knowledge and
succession crisis. Finally, it is recommended that succession planning must reflect true
succession management process.
Key words: Succession, Strategic succession planning, sustainability, Family business,

entrepreneurship.
1.0 Introduction
Business sustainability is a concept that acts for anticipating incidents that will influence
mission-critical functions and processes for the organization and ensured that it responds to
any event in a planned operation (Rick & Jacobs, 2013). Also, business sustainability is defined
as managing the triple bottom-line process by which the company manages their financial,
social and the environmental risks, obligation and opportunities (DesJardine & Practima, 2014).
However, it has been noted that many transport companies appear to lack a properly integrated
approach towards business sustainability and its planning. The integrated approaches include
243
entrepreneurship education for business succession, business management and leadership skills
(Singstat, 1998; Gibb & Buchanan, 2006; Mainoma & Arua, 2011).
In a nutshell, an effective Business Sustainability plan is crucial to transport enterprises as it

helps them with crisis adaptability, which is the key to continuity and survivability of the
company. The concern of this paper is to evaluate the reasons that influence the failure of
sustainability in transport business in Tanzania by taking a study of transport businesses in
Njombe and Iringa Regions. The paper addresses to whether succession plan could be an
answer to transport family business sustainability. Transportation sustainability is all about
carrying several emergency plans to hedge against risks and to reduce the associated impacts,
business failures and losses (Jacob, 2013). Business sustainability may be referred as
internalizing ability to have a focused response management to deal with the situation once the
consequences are known. The extent to which a company has embedded business sustainability
can play a decisive role in its ability to react in a business environment with emerging crises,
contingencies and uncertainties (Dye & Beckhard, 1986; Low & Sio, 2010). The term business
sustainability can also refer to the identification and protection of critical business processes
and resources required in maintaining an acceptable level of business. Protecting such
resources and preparing procedures to ensure the survival of the organization in times of
business disruption. There are three major resources considered in business sustainability,
human resources, financial resources and physical and movable resources. This paper
concentrates on human resources management as a factor for transport business
failures/successes for sustainability.
2.0 Literature Review
2.1 Succession planning
Succession Planning is the transfer of a business management that results from the owners’
wish to retire or to leave the business for some reasons. Succession can involve a transfer to
members of the owner’s family, employees, or external buyers. Successful succession results
in business continuity, at least in the short and medium term (Martin, et al. 2002; Harveston, et
al. 1997). Thus, in broad terms, strategic succession planning is a process through which
companies plan for the future transfer of ownership and/or top management. However, care
should be exercised so as not to confuse succession planning with replacement planning. While
replacement planning is often referred to as a means of risk/crisis management aimed at
reducing the likelihood of catastrophe from the unplanned loss of key personnel. Succession
planning entails a longer term and more extensive approach towards the training and
replacement of key individuals (Rothwell, 2001; Jacobs & Ip, 2012).
244
Succession planning (SP) is a deliberate and systematic effort by an organization to ensure
leadership continuity in key positions, retain and develop intellectual and knowledge capital
for the future, and encourage individual advancement (Jacobs & Ip, 2012). In this context, SP
encompasses not only top-level management also a width of other levels of employees. It can
cover issues such as the procedures necessary for a successful transfer, legal and financial
considerations, psychological factors, leadership development, and exit strategies.
The need to improve the understanding of succession planning and its determinants is
suggested by statistics showing that only 30% of family businesses survive past the first
generation and only 10% to 15% survive to a third generation (Dye & Beckhard, 1986; Idris &
Ahmed, 2012).This paper also identifies the theoretical succession problems of transport
business which causes failure and jeopardizes the concept of going concern in transport
business when the founder retires from management or is incapacitated.
Despite the acknowledged importance of transport business to individual person and nation at
large, little is known about the role of succession planning process. Several studies have been
done in Human resource succession planning in other fields. This paper concentrates to
reviewing succession planning for transport business. Very few studies have been done to see
the need of succession planning for transport business specifically for family business. One of
this papers’ primary goal is to address this gap and add knowledge by looking at limiting factor
for succession planning in transport business which is assumed among the causes of transport
failure for sustainability. However, human resource as part and parcel of the business success
and sustainability will be addressed to merge with the concept of succession planning.
2.2 Human Resources and its Importance to Sustainability
The importance of human resources for a sustainable organisation cannot be neglected by any
firm. The rapid increase in globalisation of business has created a stiff competitive environment
where one effective way to remain in competition is for an organisation to develop and improve
the workforce (Astrachan & Kolenko, 1994). Organisation flexibility is vital for survival in the
competitive markets as the customers’ trends changes rapidly; as a result firms have a great
need to recruit and retain skilled workforce with multiple competences and experiences. This
means to retain those developed within a firm with trained experience to be a strategy.
Employee’s commitment and loyalty to the firm are also important management issue for
sustainability (Olomi, 2004; Banfield & Kay, 2008; Senyucel, 2009). For employees to be loyal
and committed need retention strategies, the strategy includes the assurance of an employee for
being promoted to higher levels. To do so, succession planning could be a solution for retention.
2.3 Theoretical Review
245
The business sustainability today takes part of its company development programmes. The
majority of managers reflect a particular interest in the critical theory of sustainability
development as developed by John Wiley (Springett, 2003). This theory of sustainability states
that business sustainability is a function of three dimensions namely economic, social and
environmental performance. By development of this theory researcher have been placing
interests on sustainable development. The concern of researchers on business sustainable
development regards economic, social and environmental performance and the theory is termed
as the triple bottom-line theory of sustainability (Springett, 2003). A Study by Colbert and
Kurucs when criticizing the theory asserts that a company that uses triple bottom-line approach
had better sustainability as compared other counterparts (Colbert & Kurucs, 2007).
The strength of the theory is that its basis of sustainability for companies deeply concentrates
into the three dimensions which are economical, social and environmental as the basis of
sustainability. The theory seems to be a summary of other sustainability theories. However, the
weakness of the theory regardless of considering economical, social and environment
orientation, HR issues have not been considered as an issue in sustainability. Also, it is argued
that the theory does not expose the role of managers clearly to business sustainability. The
theory considers the business sustainability in the area of economic, social and environmental
setting. This paper adds literature on consideration of Human Resources as an important
element for business sustainability efforts. It is the concern of this paper, therefore to deal with
one element of HR for sustainability, succession planning for the family transport businesses.
2.4 Succession Planning for Transport Business
When an organisation is planning for continuity and sustainability, there is a need to put in
place a strategic succession planning. In the transport business, it is important therefore to have
a strategic plan at all levels as it provides a broad range of solutions to the firms’ complex
problems generated by changes of business environment and changes of customer needs
(Senyucel, 2009; Idris & Ahmed, 2012).
For a transport business to be successful it needs to include succession planning which looks
at the internal and external environment of the firm and achieves competitive advantages over
its rivals. Firms can gain competitive advantage by adapting fast to changes that occur in the
environment. Gaining competitive advantage requires short term and long term planning for
organisation’s flexibility and innovation which comes from the people who work in the
organisation (Senyucel, 2009). This requires aligning organisational goals and processes with
employees’ needs and capabilities in a systematic way. For a transport business, there is a need
of having succession planning in place which enhances various training development and
learning opportunities to benefit employees as motivation. When the employees are motivated
it is obvious they might be comfortable and loyal to the firm.
246
Succession planning is critical to transport business because in return, firms are more likely to
gain competitive advantages and there is strong possibility that, overall performance and the
relationship between the employees and the organisation will be improved. In other words,
succession planning enables decisive role in determining the future success or failure of
employees’ performance and the firm as a whole. It is important therefore that, succession
planning has to be aligned with the firm’s strategic plan otherwise a healthy strategic fit cannot
be achieved.
3.0 Methodology
The research design of this study was explanatory which attempted to explain the reason as to
why transport businesses have higher failure rate as the founder opts to handover to next
generation voluntarily or because of incapacity. Carefully by judgement selected sample of 70
transport enterprises (Sole proprietors) were subjected to open-ended questionnaire and
interviewed by trained interviewers. The transporters interviewed were selected from Njombe,
Mufindi and Iringa urban within Njombe and Iringa Regions. The reason of selection from
Njombe and Iringa regions was the people’s response to the government call for private
business to establish businesses including transportation. The transporters qualifying under
study were those in transport business for more than 5 years of operation. The collected data
was analysed by the use of content analysis to group related ideas and give meaning to
interpretation. The results will be used to design training and preparation of model for
sustainable transport business and contribute to the country’s economy.
4.0 Data Presentation and Discussions of Finding
The main objective of the study focused on investigating factors that influence the higher
failure rate of transport business operations in Njombe and Iringa regions. Specifically to
evaluate the use of succession is planning for improved business sustainability in Njombe and
Iringa regions taking a study in Njombe, Mufindi and Iringa urban districts.
4.1 Age and Sex of respondents
The profile of age for succession planning is paramount. The study established that 33% of
transporters were in the age group 36-45 years followed by age group 46-55 years with 29%
age group 56-65 years and age group above 66 years had 4% and 6% respectively. The age
groups 36-45 years and 46-55 years are reliable for taking challenges and risks for a long time.
This has been supported by Edwards that, age group between 36-45 years are said to be think
tankers to cope with challenges in the business environment (Edwards, 2014).It is known that
in Tanzania for example, one with age above 60 years has to retire from work. Therefore, the
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trend of transporters age in the study area is reliable for succession planning preparation and
possible handover to next generation.
Good representation of all workforces (men and women) is a key to any development at all
levels (URT, 2002). Both men and women in all sector settings have to contribute equally to
the development of either family or nation. It is important to note gender issues in the transport
business. This study wanted to establish whether the sector has a good composition of male
and female in its operation. This has been so as to abide by the international movement to take
all measures to support women in business. Rutashobya (1995) in the paper, Women in
Business commended the emphasis of increasing the number of interventions to support
women to speed up the processes of development and growth of women-owned enterprises
from informal to formal small and medium enterprises in Tanzania.
Results from the study showed that (59)84% of respondents were male and only (11)16% were
female. The number of men is very big compared to women respondents in the study area.
Therefore, this data shows that most of the business undertakings in transport business were
managed by men.
The findings confirm that, there were a low percentage of women running transport businesses.
This conforms to the report by Conrad & Melnik, (2009) which point out that in developing
countries, a disproportionate share of women-owned business in micro, small or medium
enterprises is not conducive.
Women must be empowered as ambassadors of business management and contribute to socio-

economic progress if transport business is to be sustainably developed. Sustainable efforts
require partnership across gender equity (Dowards, 2013). When women are empowered and
earn income, they invest back into family and community compared to the majority of men.
For sustainable development, both men and women should participate in a business
undertaking. Hence, the right of equal participation in business for men and women brings in
business development and sustainability. Studies show that men perceive women as a great risk
in senior management posts, and then they fail to give women responsibilities that could help
them grow in leadership talents. This concept has been documented by Breton-Miller & Miller
(2003), and Dowards (2013). However, most women who have been given the opportunity to
leadership have made wonderful performance in terms of business continuity and growth.
4.2 Transport business and registration
Tanzania’s trade development policy addresses the issue of legal registration of businesses as
being one of the problems for business growth in Tanzania. All the 70 transport businesses
were sole-proprietorship/family business registered by Tanzania Revenue Authority and
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SUMATRA in the names of the founder-owner. Only 11 respondents 15% declared to have
registered with the business names registration (BRELA). A family transport business here
refers to transport firm in which its members of the family hold responsibility, shares its
residuals and which doesn’t separate ownership and management. The transport businesses
under study implied that the founder or his appointed family member can run the transport
business for the benefit of the whole family. It is noted that a business should be registered by
the business name registration as stipulated in the business policy (URT, 2002).
The government of Tanzania has developed a promising policy on SMEs, within which the
policy statement states: “The government will enhance implementation of programmes aimed
at simplification and rationalisation of procedures and regulations so as to encourage
compliances and minimize transactional costs. With the statement, the strategy for this being;
is to simplify business registration and licensing procedures” (URT, 2002).
It is important to register transport businesses which will help the transporters to access
financial assistance from government and other financial institutions. Registration of business
will also simplify the process of collecting tax revenue by the government for other
development activities. However, when a business is registered, the business will gain
reputation with customers and clients, especially people who have never worked in business
before, need assurance that it is a legitimate business. A potential client may suspect your
business of being not operational if your company is not properly registered. When a business
is on file with the state, it could put your clients at ease when making a decision about whether
it is worth to spend money with the company.
4.3 Succession of family business
The respondents were asked whether they know strategic succession planning of which 63
respondents (90%) said they don’t know. However, the same statistics confirmed that they
don’t use strategic succession planning for future preparation of sustainability. In organisation
theory, succession is the process of transferring management control from one generation of
leaders to the next generation including the dynamics before, during and after the actual
transitions. A Succession of the family business is an important aspect for business continuity
and sustainability. Transport businesses involve lots of investment which need careful
management during the process of operation. Succession planning can cause a crisis to family
financial power if not handled with care. A Succession of transport business is a process over
years rather than being adhoc activity. The process involves planning, selection and preparation
of the next generation to take over business systematically and avoid business failure.
Management of succession plan can be a crisis rather than a process. The crisis explains
succession variables forced by death or disability of the former manager of business. The
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decision of inheritance/succession of a business can be reached by an outsider/consultants or
family council (Idris & Ahmed, 2012). This crisis succession planning is one which is taking
place in Njombe and Iringa regions. The owners are not ready to take part of appointing and
training successors in advance. The process of succession of transport business is critical to the
owners as they confess that majority of transport failure after the owner manager transfers to
the next generation is caused by none - preparation of heirs.
In order to ensure the long-term prosperity of succession to family members, promotion and
mentoring are essential for developing and maintaining the founder’s entrepreneurial values
and drive. The point is emphasized by Astrachan & Kolenko (1994), who noted that successful
heirs are generally observed to be well-prepared in terms of educational background and
experience, and to have spent a number of years working at all levels within the company
concerned. Successful family transitions also enjoy positive family relationships with limited
conflict, rivalry and hostility, and good levels of trust (Astrachan & Kolenko, 1994; Morris et
al. 1996; Mainoma & Arua, 2011).
In transport family firms under study, the preference for sons rather than daughters to succeed
often means that provisions for daughters to become successors is neglected and in some cases,
leading to intense sibling rivalries which result in harmful effects to both the organization and
family relationships. Gender discrimination has also been reported by respondents as the
culture inhibits them to include women in the process as they will have to be taken up for
marriage to other families. The climate seems to be firmly entrenched male domination when
it comes to succession (Achumba & Nkiruka, 2012).
Evidence exists to substantiate the belief that the presence of alert organizational planning and
preparation for succession is among the most important factors in ensuring effective succession
for business sustainability. Family succession in the broadest sense can be a highly emotional
and controversial issue, which can lead to major gaps within the family and the business as
participants. To maintain family and organizational cohesiveness, owner-manager must
develop planning processes and mechanisms that provide a valid structure for the transference
of leadership (Dye & Beckhard, 1986; Idris and Ahmed, 2012).
In the transport business, the succession was given as passing of properties to a person upon
death of the owner of the property. It is this concept which was observed to the respondents in
the study area. It is not now in the business world that the owner must die, but is all about
preparing for an heir for management purposes for enhanced business sustainability. The owner
manager can opt to retire and enjoy the rest of his life after a hectic of working life.
Planning for strategic succession usually includes an identifiable set of elements, all of which
must indicate the actual succession event. The proposed elements that would most typically be
250
included in such a plan: (1) identifying the pool of potential successors; (2) designating of the
successor; (3) notifying the successor (Kesner & Sebora, 1994). The elements described to
provide a framework for understanding the tasks required for a suitably comprehensive
succession-planning process. For example, giving consideration to several possible successors
might indicate that a more comprehensive succession process is undertaken than when only
one successor is considered. However, the owner-managers can use the same elements to
choose a successor from outside the family members. The heir of transport business can be a
driver or any employee who has been selected through the elements. In Tanzania, Business is
transmitted to a male heir who is being nominated by a family council without consideration
of the relevant skills, competence and leadership skills needed to run the business.
The extended family system also creates severe pressures on the proposed successor and the
family business, as cultural practices and customary law give them a claim to the properties of
their departed relatives. The extended family which includes uncles, aunts, nephews and
cousins are also deemed legitimate claimants to a shared estate of the enterprise founder. The
head of the extended family has powers and high influence in the sharing of the estate of the
founder-owner during the family council.
It was learned that succession process for transport business has several challenges which the
owner managers experience. Succession challenges can arise from internal or external sources.
Hereunder is the analysis of transport business based on internal problems which included
culture analysis, lack of succession planning and the succession crises.
4.4 Culture influence
Culture is a complex concept which includes knowledge, beliefs, art, morals, customs and any
other capacities and habits acquired by members of the society. This can be inherited from
generation to generation as norms (Idris & Ahmed, 2012; Iguisi, 2012).Culture is the entire
way of life a society is experiencing including their products. Society is then composed of
individuals who share a culture as material or non-material. To be a member of society means
one shares and adheres to culture patterns. In this sense, a society is more than the sum of its
members. Membership in a society necessarily involves sharing a way of life and engaging in
similar patterns of thought and behavior (Astrachan & Kolenko, 1994; Idris and Ahmed, 2012).
Humans are not born with pre-determined solutions to most of the life’s problems, they use
culture as a toolbox that provides answers that are learned and shared. Culture provides material
and nonmaterial solutions to different problems: buildings art, how to find food, deal with
social relationships and the knowledge of human mortality, heal sickness and express emotions.
This is the material culture. Non-material culture comprises the software of society. Specific
non-materials culture are the shared ways of thinking that are shared by members of society
251
such as language, beliefs systems, customs, myths, music, scientific knowledge or political
ideas. In other words, culture provides ready-made but variable formulas on how to be a human
being in a given society.
The problem faced by human societies change over time, as such, culture is dynamic as new
solutions are needed. Understanding culture for the purpose of small business development and
sustainability is extremely important. This is because the presence of economic, political and
technological development is not necessarily producing the desired results, particularly if some
cultural factors remain as barriers to business development and sustainability.
Transport business is not isolated; it works within culture setups. It was learned that in Iringa
and Njombe the rules of culture and law on succession are uniform that the family businesses
are not based on best inheritor. The business owners do not have testate, which means the
transport owners do not have written will before one retires from business management. It is
only based on the first born boy of the family; if the family has no boy or the boy is teen another
one from the family will take over the business waiting for the boy to grow up. The selection
of the business successor does not depend on experience or competence of the one selected.
The cultural law of inheritance seems to cause the closure and failure of business as the one
inherited is from a theory of intestate. This is the state that, the founder-owner did not put down
in writing the process of succession of the transport business before he retired from business
operation. This can be concluded that culture has a role in the succession planning for transport
business sustainability. Culture setup must be based on the elements of succession planning
incorporating them in planning for sustainability of business.
4.5 Lack of succession planning
Transport business owners often perceive that management succession planning is a tedious
paperwork exercise that fails to produce candidates with the capabilities to lead required
business change. A traditional planning and review process, however well documented, does
not necessarily lead to needed results. The desire for new competencies and rapid business
transformation often leads owners instead to unusual choices internally or external recruiting.
Succession decisions made as vacancies occur are therefore addressed as make or buy choices
(develop internally or recruit externally).
Transport owners ask, “Why should we try to groom talent when it is ever more difficult and
when requirements are rapidly changing, uncertain and expensive? Why to bother to spend
precious time on succession planning?” It is the questions which make owners not bother to
prepare business succession planning (Idris and Ahmed, 2012).Transporters establishes
business and assumes all the responsibilities without involving any family member including
252
spouses. It has come into minds that, the majority of the transporters do not trust any member
of the family on the assumption that they mighty misuse the transport resources.
Despite the transporters knowledge for sure that it will happen a time of retirement either
voluntary or otherwise, in most cases nothing is done as preparatory measures. The retirement
of the founder doesn’t mean the end of the transport business according to the theory of
continuity and going concern. It is established that transporters structures and creates a business
to reflect their personality. The owner manager insight into and control creation of process
cannot be transferred to his successor when the owner is alive. The severity of the strategic
succession problem in transport business is the heart of transport business failures.
4.6 Succession crisis
A Succession crisis is a situation whereby fear and resistance is generated within the workforce
as a result of the uncertainty about what the new leadership will be for the future. It is said to
be important for the management to make sure there is a plan for a business successor. When
there has been no written will ‘testate” of the founder manager the succession is said to be in
crisis. Considerable evidence exists to substantiate the belief that the presence of conscious
organizational planning and preparation for succession is among the most important factors in
ensuring effective succession for business sustainability (Kesner & Sebora, 1994).
To maintain family and organizational cohesiveness, management must develop planning

processes and mechanisms that provide a valid structure for the transference of leadership.
Succession planning framework for the transition in leadership from one generation to the next
gains additional legitimacy if well prepared and shared among the members. The transport
owners have the role in helping bring children into family business.It is learned that transporters
delay the process of bringing children until it is too late. Failure of the older generation to trust
their heirs and pass on the detailed understanding and confidence of business life delays
succession of the business. The Crisis comes as the children become executive without
adequate on the job experience. The older generation needs to avoid the pitfalls if they desire
the transport business to be sustainable by the use of succession planning.
5.0 Conclusion
One of the fundamental missions of a family business is to pass the business to subsequent
generations for sustainable income generation. A substantial amount of literature has addressed
issues of succession planning processes as being a factor to sustainable business. Results
suggest that succession planning influences success or failure of the family firms for
sustainability. Considering the contribution of transport sector towards the economic
development of a country; it is significant that there should be a paradigm shift towards
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transport business succession planning. The transport sector, despite the increasing family
income it is also important for creation of employment and improving the standard of living of
the local population.
The main objective of business establishment is to serve the community at present and future
times. No business is established and intends to end within a short time. Continuity theory
states the importance of establishing businesses and become successful while continuing to
save the intended market for long. It is learned that one of the factors for sustenance is the
preparation of succession plan. A succession planning will ensure the survival of operation
beyond the founders’ life. That is the founder’ strategically prepares one set of heirs to proceed
with business operation after the founder’s retirement. From the set of the pool, one will be
selected to lead the business hence the business becomes sustainable.
6.0 Recommendations
In view of the foregoing the following recommendations are made:
The entrepreneurs in transport business must act proactively by crafting succession planning
early enough. The succession planning must reflect true succession management process. The
founder must choose the best person to succeed as the family business has to be sustainable.
The government policies and programmes must address the cultural values that stimulate and
positively promote small business and entrepreneurship development initiatives.
There should be a strategic planning process which is modelled in a way that will help the
business community to follow for sustainable business.
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How Organisational Training can Influence Employee Performance and
Employee Intention to Leave Manufacturing Companies: A study of
Ghana.
James B. Abugre
jbabugre@ug.edu.gh
University of Ghana Business School
Alex Anlesinya
University of Ghana Business School
alexanlesinya@yahoo.com
Abstract
The purpose of this paper is to investigate how organisational training can influence employee
performance and at the same time influence employee turnover in manufacturing companies.
It aimed to achieve this through a cross-sectional survey of a multinational company in Ghana.
Thus, a sample of 89 employees from a manufacturing company in Ghana was used as an
investigation to test two asymmetrical hypotheses of organizational training leading to
outcomes of employee performance and employee intention to turnover. Using regression
analysis, findings showed that organizational training is positively related to employee
performance. In addition, findings showed that organizational training is positively related to
employee intention to leave their organizations. The work recommends that organisations in
Sub-Saharan Africa must learn from this work and be aware that different motivation and
expectations of organisational training are hunted for by employees as they are engaged in
organizational training.
Key words: organizational Training, employee, performance, Intention to Leave, Sub-Saharan

Africa.
Introduction
Different dimensions of training have been found to influence employees’ reaction to their
organisation (Bulut and Culha, 2010). Arguably, when employees participate in organisational
training, they contribute positively in terms of performance to their various organisations
(Abugre and Adebola, 2015). Similarly, organisational training, and employees’ opportunity
257
to learn and develop their skills deter employees’ intention to leave the organisation (Arnold,
2005). Thus, the goal of organisational training appears to be two-fold: to improve employee
performance outcomes and the overall welfare for clients and, to improve organisational
outcomes through enhanced employee skills and competency thereby increasing the rate of
their intention to leave the organisation. Therefore providing organisational training to
employees to keep them current on their job functions and allowing them to learn new skills
can improve their satisfaction with the organisation (Rice et al. 1991) thereby enhancing their
retention rate.
Training entails the systematic and planned instruction and development activities to promote
learning (Armstrong, 2005). It is the act of enhancing knowledge and skills of employees for
doing some particular jobs (Aswathppa, 2009). Consequently, the primary goal of any
organisational training program is to impart on employees a new set of knowledge, skills,
ability and behaviour, or attitude (Tai, 2006), or the expectation that is related to their jobs and
therefore affects their career (Al-Alawneh, 2008). Hence, the survival of any organisation in
this competitive world lies in its ability to train its human resource to be creative and innovative
who will invariably enhance performance and increase competitive advantage (Vemić, 2007;
Edralin, 2004). Training and the development of employees is a human resource practice that
intends to enhance employees’ skills, knowledge, and competence capable of performing more
efficiently (Palo and Padhi, 2003). It is one of the most pervasive techniques for improving
employees’ performance and consequently enhancing organisation productivity (Gupta,
Bostrom, and Huber, 2010).
Though training is an active means that enables individual employees to make use of their
capabilities and potentials (Khanfar, 2011), it is argued that as training increases the value of
the employees, it also increases the likelihood of their being “poached” by rival companies
(Green, Felstead, Mayhew and Pack, 2000; Sieben, 2007; Benson, Finegold, and Mohrman,
2004). Thus, the authors affirm that companies that train their employees extensively end up
generating higher turnover precisely because the trained personnel leave the company for better
paid jobs where they can use the skills they have acquired. Therefore, one of the most
commonly cited reasons why some organisations under invest in training is the risk of
employee turnover; however, there is no consensus in the literature about the connection
between turnover and investment in training that leads to performance. Turnover and
performance on both the employee and organisational levels are closely interrelated. For that
reason, an organisation should consider how it predicts a training and development programme
to affect employee effort in terms of performance as well as employee turnover or intension to
leave the organisation. Similarly, an organisation should anticipate how the cost of training
employees can affect how much they contribute and how often they leave for other firms in
contrast with untrained employees. This is particular so as most organisations in Sub-Saharan
258
Africa (SSA) are confronted with the dilemmas of employee and organisational performance
and employee turnover resulting from organisational training.
The present study has two aims. The first aim is to examine how organisational training can
influence the performance of trained workers. The second aim is to evaluate the contention that
organisational training would lead to employee intention to leave and turnover. Thus we
conduct a regression analysis on organisational training and the performance of employees as
well as their intention to leave the organisation.
Conceptual Rationale
According to Campbell (1989), there is a renewed interest in the influence of trainee motivation
on training effectiveness. Therefore, researchers must endeavour to offer a greater attention to
issues such as individual and situational influences on trainees' motivation and trainees’
cognitions with regard to the significance of organisational training and the desired outcomes.
For Vroom (1964), the valence-instrumentality-expectancy theory framework concerns the
affective orientations of individuals toward outcomes, and this can be interpreted as the
consequences or anticipated satisfaction of the individual to the outcome. For example,
organisational training as a HR process can influence an employee’s affective orientation
towards performance (Houger, 2006: Abugre and Adebola, 2015) as well as turnover
(Summers and Hendrix, 1991). Consequently, several writers have suggested that a valence-
instrumentality expectancy approach should prove useful for studying training motivation
(Williams, Thayer, and Pond, 1991: Mathieu, Tannenbaum, and Salas, 1992). The reason is
that employees are motivated to participate in training for various reasons. As some may be
motivated to be trained as a result of enhancing their performance and thereby contributing to
organisational outcome (Grober, Warnich, Carrell, Elbert, and Hatfield, 2002) others may be
motivated to build their careers (Bloisi, 2007: Abugre and Adebola, 2015) leading to their
employability elsewhere (Cappelli ,1999). Therefore, organisational training is capable
enhancing worker performance in the workplace, and at the same time capable of activating
worker intention to leave the organisation for market reasons.
In the current study, we assess the influence of training on employee performance and turnover
as individuals can either be motivated to increase their performance whilst working or leave
the organisation for better conditions elsewhere.
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Figure1: Hypothesised structural model
Employee
Performance
Organisational
Training
Employee
H1
Intention to
Leave
H2
The figure above shows our hypothesised relationship between the variables: organisational
training and employee performance and intention to leave. We argue that an individual’s
performance or his/her intention to leave is motivated by situational influences resulting from
the organisational training he/she has received. These links or relationships are discussed in the
subsequent paragraphs by explaining how individual employee and situational influences are
motivated by his/her behavioural intention
Organisational Training and Employee Performance
The issue of organisational training and performance has been examined by various researchers
(see Abugre and Adebola, 2015; Ahmad, Iqbal, Mir, Haider and Hamad, 2014; Aidah, 2013;
Akuoko, 2012; Appah, Tebepah and Soreh, 2012). All these studies investigated the effect of
organizational training on performance and have been shown to have positive outcomes. For
example, Jagero et al. (2012) examined the influence of on-the-job training on employee
performance in DHL and FedEx Courier companies Tanzania. Using a simple random
sampling method, the researchers selected 150 workers for inclusion in the study. Their results
show that employee performance largely depends on the training they received. Similarly, in a
qualitative research which focuses on mechanics in Northern India, Barber (2004) found that
on-the-job training leads to more innovation and tacit skills of workers. Equally, Shah et al.
(2014) assessed the influence of on-the-job training on employee performance in microfinance
banks at Khairpur. In their findings, they concluded that training is vital for enhancing the
effectiveness of workers. Also, Ahmad et al. (2014) revealed that positive relationship exist
between on-the-job training and employee performance as well as between trainers’ delivery
style and employee performance in the Banking Sector of India. All the mentioned works
260
suggest that organizational training has significant positive influence on employee performance.
However, it is noteworthy to point out that these studies only focused on one type of employee
training, that is, on-the-job training. This may have limitation in terms of generalization within
the broader context of organisational training. Nonetheless, the impact of training on
performance of both employees and organizations has been phenomenal in the human
development literature. For example, in the broader concept of training employees, many
researchers (see Aidah, 2013; Arthur et al. 2003; Falola, Mansour, 2013; Osibanjo and Ojo,
2014; Osman, 2014; Otuko et al. 2013; Sultana et al. 2012; Umar et al. 2013) have investigated
various forms of training and how they influence employee performance in work organizations.
For example, Aidah (2013) have investigated whether training significantly affect employee
performance in the telecommunication industry in Uganda. The findings of his investigation
suggest that training is a significant predictor of employee performance. Similarly, Mansour
(2013) examined the relationship between training and employee performance, and motivation
and turnover in Saudi private companies. The results showed that there is a positive relationship
between training and performance of employees. Likewise, Sultana et al. (2012) assessed the
influence of training practices of the telecommunication industry in Pakistan on employee
performance. It was found that when companies invest in the right type of employee training,
it can serve as a booster of employee performance, competencies and skills. The study further
found that training can be used as an instrument that will enable companies to cope with
changes that come in the wake of technological innovation; market competition, and
organizational restructuring. Otuko et al. (2013) also measured the effect of organizational
training dimensions on employee performance at Mumias Sugar Company in Kenya. The
authors use a sample of 150 employees and 6 departmental heads. The findings revealed that
training needs assessment positively and significantly influenced employee performance in
Mumias Sugar Company Limited. Additionally, training contents also positively influence
employee performance in the same company. More so, training evaluation and employee
performance was also found to be positively correlated. Thus, the importance of organizational
training on employee performance has been well documented in the human development
literature. In a study of training and development of bank employees and the performance of
the banking industry, Umar et al. (2013) found that training and development is a predictor in
the performance of the banking industry.
Moreover, in a meta-analysis of 165 studies comparing organizations that undertook training,

pre-training, and no-training, Arthur et al. (2003) were able to ascertain that training had an
overall positive effect on employee performance. More so, Osman (2014) investigated training
and development and employees’ job performance in Yaba College of Technology in Nigeria.
In their findings, they observed that training and development programmes can serve as
instruments for employees’ effectiveness in educational institutions. This finding reinforces the
importance of developing human skills in educational institutions following Sarbeng (2013)’s
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investigation of training and development programmes and performance of teaching staff at
the various departments at University of Cape Coast. The findings show that even though the
training programmes are not perceived as fair enough, it has positive effect on workers’
professional knowledge, intellectual planning, class attendance and assessment. It was further
found that instructional delivery has also improved as a result of training.
In Ghana, Abugre and Adebola (2015) studied some Ghanaian financial institutions to see
whether training and development of middle-level managers impact on both organisational and
individual performance. Their results showed that training and development of middle-level
managers significantly influenced the performance of financial institutions and the managers.
Similarly, Akuoko (2012) had earlier investigated the influence of training and development
on the performance of workers at District Assemblies in Ghana. Using the stratified sampling
technique to select 200 research participants, it was found that training and development had
positive effect on employee performance. Equally, in analyzing the effect of training on
employee performance in the Kumasi Metropolitan Assembly, Boadu, Dwomo-Fokuo, Boakye,
Kwaning (2014), found a positive influence of training and development on employee
performance. As aresult, we hypothesised that:
H1: The Influence of Organizational Training will Positively Correlate with Employee
Performance in Manufacturing Organisations.
Organisational Training and Employee Intention to Leave
Organisational training is believed to be a major determinant of employees’ intention to leave.

This is because; training can make employees have complete intention to leave their
organisations for better jobs elsewhere or may stay to perform their duties. As beneficiaries of
organisational training may be motivated to reciprocate their organisations for their investment
in them by increasing their work output, some employees may tend to increase their intensions
to leave for better places due to increase in new skills.
Consequently, various writers (Ahmad, 2013; Bambacas and Kulik, 2013; Bhat, 2014; Rahman
and Nas, 2013) have examined the effect organizational training can play or have on employees’
intension to leave or their intensions to stay. For example some of these researchers have found
that organisational training significantly reduce intention to leave among workers. For example,
Ahmad (2013) assesses the influence of training on workers’ intention to leave their company.
The researcher utilizes convenience sampling method to select 100 workers from public and
private sector organisations. The correlation and regression results suggest that training has
positive relationship effect on workers’ retention and negative effect on intention to leave.
Similarly, Bhat (2014) examines the effect of human resource management practice on
organizational commitment and turnover intention among call centre workers in the Kashmir
262
Valley. It was found that human resource management practices influence intention to leave
among the workers. Using a sample of 329 participants from public universities, Rahman and
Nas (2013) showed that workers’ intention to leave was significantly influenced by employees’
development perceptions.
Hence, it is obvious that organizational training can play significant roles in reducing as well
as increasing turnover intentions among workers. For organizational training to engender
employee intension to leave, it is argued that general employee training produces experiences
as well as expertise that are equally important or relevant to other companies. This therefore
leads to increased intention to leave among trained workers. This is because these trained
workers can become easy target for companies to poach (Green et al. 2000; Sieben, 2007;
Benson et al, 2004). Consistent with this finding, Ali et al. (2015); Pedler, Burgoyne and
Boydell (1991) and Senge (1990) also add that companies that organize effective training for
their workers create more turnover intention among their workers. They explain that trained
workers quit their companies or institutions for better paid jobs. They also leave to for the
organizations where they will be allowed to utilize the skills or the knowledge they have
acquired. Ali et al. (2015); Pedler et al. (1991); Senge (1990) further maintained that
organisational training and development programmes improve the value of the workers. It also
enhances their career growth, and this increases the probability of their being “poached” by
competitor organizations.
Furthermore, Pedler et al. (1991) supported by Senge (1990) equally argued that training and
development of employees help them to become accustomed with the current methods of doing
a particular work resulting from the new expertise, knowledge and abilities gained from the
training. This allows them to become more employable in other organisations. In line with this,
Seibert and Kraimer (2001) supported Smith (2010) to suggest some reasons why training may
generate more turnover intention among employees. According to them, people may take part
in training with the motive of getting opportunities to network with colleagues and significant
others. These new contacts may in turn open doors for job transitions. In an empirical study of
59 workers in a banking industry, Ali et al. (2015) suggested that training and development
programmes lead to higher intentions to leave among workers in the organization if it has a
weak system to retain its employees.
This means that there can be a positive effect of training on intention to quit an organisation.
Consequently, we hypothesize that:
H2: The Influence of Organizational Training will Positively Correlate with Employees’
Intention to Leave in Manufacturing Companies.
Research Methodology and Design

263
This study sought to investigate the effect of employee training on employee performance and
their intensions to leave in a manufacturing company in Ghana - Automotive Spring Ghana
Ltd. In order to achieve the purpose of this research, we adopted a cross-sectional survey design
in the form of a quantitative methodology. The use of cross-sectional survey design helped the
researchers to collect data from the research participants at one point in time. Also, the use of
the quantitative research approach assisted the researchers to use questionnaire to collect
numeric data for analysis in order to facilitate generalisation.
Population and Sampling
The population of interest for this study is defined as all employees of a large automotive
manufacturing company in Ghana who have benefited from the organisation’s training
programmes. The choice of the automotive industry is based on the fact that the automotive
industry is currently being affected by constant technological advancement and increased
customer awareness about the various brand choices that are available to them due to
availability of information. As a result, most of the industry players are expected to train their
workers regularly to build their capacity in new technologies of their products in order to meet
the changing needs of customers.
The company has a total of 125 employees, and using a simple random sampling procedure to
obtain as many respondents as possible, we were able to get a total of 89 respondents
Data Collection and Instrumentation
Data for this study was collected using a research questionnaire. The questionnaire had four
sections. The first part of the instrument dealt with participants’ demographic details such as
age, level of education, job position, and work experience.
The second part dealt with employee performance using Podsakoff and MacKenzie’s (1989)
five-item scale for job performance. These items were measured on a 5-point Likert scale with
1=strongly disagree to 5=strongly agree. It has a reliability value of 0.85. Sample items include:
I feel successful on my job when. I perform better than my colleagues; I accomplish something
where others failed.
The third part was Organisational training scale. The 14 item scale was adopted from Al-
Alawiyat, (2010). The items were measured on a 5-point Likert scale with 1=strongly disagree
to 5=strongly agree. Sample items included: Training can give me new opportunities; Overall,
the training I receive meets my needs; my department provides training opportunities to meet
the changing needs of the workplace. Reliability value is 0. 80.
264
The final part which constituted the Intention to leave was measured with three item-scale
developed by Babin and Boles (1998). The items were measured on a 5-point Likert scale with
1=strongly disagree to 5=strongly agree. A sample item from this scale is: It is highly possible
that I will be looking for a new job. Reliability value is 0. 85.
Data Analysis
The data was analysed using hierarchical regression. The use of hierarchical regression assisted
the researchers to determine the effect of organisational training on employee performance and
intention to leave while controlling for gender and organisational tenure in the regression model.
The analysis was done with the aid of SPSS version 22.0 software.
Results
Table 1: Correlation Matrix of Training and Employee Performance and Intention to Leave,
Measures Mean SD 1. 2. 3. 4 5
Employee Performance 29.75 4.05 1
Intention to Leave 12.47 2.17 -0.11 1
Organizational Training 57.04 8.01 0.48** 0.40** 1
Organizational Tenure 7.07 3.80 0.08 -0.05 0.08 1
Gender - - 0.18 -0.00 0.28** 0.08 1
** Correlation is significant at 0.01
The Table 1 above shows the correlation matrix of employee performance, intention to leave,
gender, organisational tenure and organisational training. The internal correlations between the
independent variables demonstrate low correlation figures thus our results show a healthy
analysis.
265
Table 2: Hierarchical Regression Results Predicting Employee Performance and Intention to
Leave from Organizational Training
Measures Employee Performance Intention to Leave
Model (1) Model (2) Model (3) Model (4)
Gender 0.1790 0.052 0.003 -

0.117
Organizational Tenure 0.066 0.038 -0.048 -0.075
Organizational Training - 0.464*** - 0.439***
R2 0.038 0.236 0.002 0.180
F-test 1.711 8.751*** 0.100 6.202***
***p<0.01 Sample size (N) = 89
Table 2 shows the results of the regression analysis. The first hypothesis sought to ascertain
the impact of organisational training on employee performance. The hierarchical regressions
in Model (1) and Model (2) were performed to test this hypothesis. The results as shown in
Model (2) demonstrates that organisational training has a significant positive effect on
employee performance (β = 0.464; p < 0.05). This means that the more employees received
training the higher the likelihood that their performance will improve. Also, the coefficient of
determination (r-squared) showed that organisational training accounts for only 0.20% (ie. R2
= .0.002) variations in employee performance. In addition, the overall model is also significant
[F = 8.751; df1 =3, df2= 85, p<0.05].
The second hypothesis sought to determine the effect of organisational training on intention to
leave among workers. The hierarchical regression results in Model (3) and Model (4) were
performed to test the second hypothesis. As shown in Model (4), organisational training
positively and significantly predict intention to leave (β = 0.439; p < 0.05). This results suggest
intention to leave will be high the more workers are trained. Furthermore, the coefficient of
determination (r-squared) implies that organisational training contributes only 18.0% (ie. R2=
0.180) to intention to leave among workers. More so, the overall model is significant [F =
6.202; df1 =3, df2 = 85; p<0.05).
Discussions of Findings
266
The purpose of this study was to investigate the effect of organisational training on both
employees’ performance and their intention to leave. As predicted and in consistent with other
researches, our findings show that organisational training can positively impact employee
performance leading to the overall performance of an organisation, and also positively impact
on employee intention to leave leading to turnover in organisations. Therefore two
characteristics of the situation studied on organisational training were hypothesised to influence
employee performance and employee intention to leave. Consequently, our hypothesised
model in figure 1 above fits our data reasonably well and presents a starting point for
generalisation to other contexts of study and also for other researchers to test.
The first hypothesis was accepted depicting that when employees embark on organisational
training; their performance is enhanced resulting from the improved skills they acquired from
the training. This means that training is a reactive factor that influences employees’ ability to
execute their organisational tasks positively. By this, both employees and the organisation
would benefit from the organised training. Whilst employees would gain skills and new ways
of doing a job task and thereby increasing their technical and operational skills, organisations
would benefit from these skills which have been acquired by employees through the training
programmes. Thus, the finding of this study is consistent with those of Houger (2006), Abugre
and Adebola, (2015). This calls for continuous learning in most organisations in SSA
environment as most SSA institutions and organisations are struggling to compete with the
more technologically advanced companies in the developed world.
The second hypothesis which stated that organisational training is positively correlated with
employee’s intention to leave was also accepted meaning that when employees received
organised training they are most likely to leave their organisations for other firms. This finding
is consistent with those of Ali et al. (2015); Pedler et al. (1991) and Senge (1990) who argued
that organisational training and development programmes improve the value of the workers
and enhances their career growth elsewhere. This explains further that when workers believe
that they have improved their knowledge, skills and abilities through personal development
and training, they tend to look elsewhere for better condition of work and therefore increasing
their intention to leave their organisations. This is very much a common problem in the
extractive industries where new and contemporary skills of workers are very much desired by
competitive firms. Thus, it is common to see engineering workers in manufacturing companies
jumping to different firms after acquiring a certain levels of experience. This is in a daily
occurrence in many developing countries especially those in the SSA region. Accordingly,
most SSA economies are suffering from experienced skills leaving not only in the
manufacturing sectors but educational and higher educational institutions and the health sectors
as well. This canker normally referred to as ‘brain drain’ is serious affecting most African
countries due to low income levels perceived by employees rendering the institutions ill-
endowed
267
The collective findings of this work suggest potentially useful managerial and theoretical
lessons for practitioners and academics. Organisations must learn from this work and be aware
that different motivation and expectations of organisational training are hunted for by
employees. Whilst others may be motivated to increase their performance after training, others
would be motivated to want to leave for other organisations after the training. HR managers
and organisations must therefore study the trends of employees’ demand in relations to their
career development in order to minimise cost implications of turnover of employees after
training. On the other hand, HR managers and organisations must encourage organisational
programmes that help to develop their human resources into capable skills for this global
competitiveness. Thus, the findings of our work should be replicated in other SSA settings with
different types of training programmes. We recommend that the approach be expanded to
include variables related to the motivation and transfer of behaviours learned during the
training. We also consider the results of this study to be a first step toward the development of
an integrative model of training motivation. Thus, future research needs to consider the scope
and nature of organisational training programmes and the individual and situational variables
that influence training effectiveness.
Limitations and avenues for future research
Like most empirical research, this study has its limitations. The first limitation includes the
usage of cross-sectional data; therefore, no causal inference can be made regarding the
relationships in this study. Nevertheless, the researchers believe that it is a good start to measure
the factors of employees training vis-à-vis performance and turnover of employees. Second,
our data collection was based on one single organisation, and therefore generalisation of the
study may not be justified across other manufacturing organisations. Besides, the sample size
is also too small to warrant a larger generalisation. Based on the above, future studies may take
these weaknesses into consideration.
Overall, the study highlights that organisational training can lead to employee performance and
at the same time employee turnover intensions. It offers insights into the importance of
organisational training to both manufacturing companies and the employees who work in these
companies
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Corporate Governance: Theories and Relationship with Organizational

Performance in Developing World
Stephen James and Straton Matei
skamugisha@irdp.ac.tz and tonymatei@gmail.com
Institute of Rural Development Planning, P.O.BOX 138. Dodoma
Abstract
This paper reviewed theories of (CG) and its manifestations on (OP) in developing world. The
paper found usage of multiple theories of (CG) including agency, stakeholder, stewardship and
resource dependency theories rooted from developed world. It also found that (CG) on (OP)
brought mixed results because while board of directors’ measures including presence of female
board members, independent directors, board size (large boards), CEO duality were related to
(OP), other studies failed to reveal positive relationship between many of such variables and
performance on (ROE), (ROA), (PM), (DY) and (TQ). Yet studies on relationship between
firm ownership structure and (OP) revealed consistent results whereby managerial, company,
institutional and foreign ownership were positively related to (OP) while individual,
government and concentrated ownership had negative results. Implication is that while (CG)
theories derived from the developed world were used in developing world, theories from its
272
perspective were needed. Further implication was that organizations should institute (CG)
measures: small board size, independent directors and CEO/Chairman separation since they
reduced agency problems. The paper suggests doing studies on challenges in using those
theories of (CG) while others should be carried out to verify linkage between (CG) and (OP)
by considering other factors affecting (OP).
Key Words: Corporate Governance, Theories, Organizational Performance, Developing World
1. Introduction
Corporate governance (CG) has evolved from democracy and incorporates several dimensions
of democratic values such as enfranchisement, separation of powers and representation (Korine
and Gomez, 2005). This assertion calls for an argument that (CG) began to permeate the
business organizations of the developed world since the institutional reforms based on
democratic principles in England, USA, France, Germany and Italy from 17th to 19th centuries.
Corporate governance was adopted in the developing countries in 1980’s (Mulili and Wong,
2010) due to the stock market crashes in many parts of the world and the failure of some
corporations due to poor governance practices (Francis, 2002 as cited by Mulili and Wong,
2010). Structural reforms of the economies based on price deregulation and competition
(Claessens and Yurtoglu, 2012) also increased complexity in the mechanisms of monitoring
capital usage in various companies and subsequently there was a need to deploy good (CG) in
the organizations. Other circumstances which led to the inclusion of (CG) in the developing
world could be related to the corporate financial accounting scandals in USA involving Enron
and WorldCom in 2001 and 2002 (Cheng and Rayton, 2004), leading to the need of its adoption
in corporations. Corporate governance is vital because it can pave a way to the growth and
development of the country’s economy (Clarke, 2004 as cited by Mulili and Wong, 2010). It
eliminates inefficiencies and unethical business practices and eventually the economic
prosperity of the emerging economies take place (Mutyala and Dasaraju, 2011).
At organizational level, it can create managerial excellence (Okpara, 2011) and help the firms
in raising capital and attract foreign investors (Okpara, 2011, Hugil and Siegel, 2013, Claessens
and Yurtoglu, 2012, McGee, 2009). Many developing countries have (CG) laws (Blume and
Oman, 2005) which design its structures accordingly. Brief legal overview on (CG) can be
made in Tanzania whereby the Companies Act, Cap 212 provides a framework for (CG) in
corporations both private and public as well as public listed companies (Mkono and Co, 2005).
According to the legislation, Tanzania has a board structure which consists of balance of
Executive and Non-executive Directors. Directors are appointed by shareholders annual
general meetings and their powers and duties are laid in company’s articles of association and
usually included in their appointment letters. Shareholders’ structure being stipulated in the
law is a minimum of two members and their powers are: to vote consisting of proxy voting
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rights, powers to approve decisions made by directors and minority shareholders are protected
as well by allowing them to apply for court intervention in case of oppression and company
mismanagement. The law requires the companies to keep proper accounts for revenue and
expenditure, its sales and purchases, its assets and liabilities. The companies also are obliged
to appoint auditors at the annual general meetings and they can be liable criminally in case of
professional negligence and circulation of false accounts. The Capital Markets and Securities
Act, 1994 also provides a base from which (CG) Best Practices for public listed companies are
derived in order to promote governance in line with international standards. Some of these
practices recommended are: board composition should include the independent non-executive
directors (1/3 of members), CEO/Chairman separation, equal treatment of shareholders,
independent audit committee, disclosure and transparency (CMSA, 2002). Some of this
material on (CG) is not accessible to the non-academic (Claessens and Yurtoglu, 2012) and
therefore this paper intends to fill the gap by reviewing the theoretical inclinations and the way
(CG) manifests on organizational performance (OP) in the developing world and thereby
creating avenues for policies and further studies in organizations.
2. 0. Conceptual Analysis
2.1. Corporate Governance
Corporate governance (CG) means various things to different people (Mudashiru et al, 2014,
Claessens, 2003). It involves the mechanisms through which corporations whether private,
publicly traded or state-owned corporations are governed (Economic Commission for Africa,
2002). According to Cardbury Report (1992) and World Bank (2006) corporate governance is
the system by which business organizations such as companies are directed and controlled.
Corporate governance is understood as a frame work of rules, relationships, systems and
processes within and by which authority is exercised and controlled within corporation and
involves the mechanisms by which companies and those in control are held to account (ASX,
2014). Corporate governance is also viewed as a set of relationships amongst the company’s
management, its board of directors, its shareholders, its auditors and other stakeholders in
which rules and incentives provide the structure by which the objectives, means of
achievement as well as monitoring performance are determined in the company (www.
Shodganga.inflibnet.ac.in/).
The Government of India (2007) and Raut (nd) define the concept as a process by which
companies commit themselves to values and conduct of business ethics in order to maximize
the shareholder values sustainably, while observing fairness to all stakeholders including
customers, clients, employees, investors, vendors, government and the society as a whole. Its
274
essence is based on the principles of integrity, honesty, transparency and accountability so that
companies can satisfy the interests of all (Oso and Semiu, 2012). Therefore the
conceptualization above helps in deriving a definition of the term as a mechanism or process
in which companies establish relationships between the management and the board by
imposing controls and directions so that the firm develops commitment to the values and ethics
which ultimately lead to the achievement of shareholder desires, and at the same time protect
the rights of internal and external stakeholders.
3.0. Discussion of Key Issues
3.1. Theories of (CG) in Developing World
Most of the literature reviewed reveal that (CG) in the developing world is inclined to multiple
theories and mostly include agency, stakeholder, stewardship and the resource dependency
theories (Al Mamun, 2013, Pande, 2011, Abdullah and Valentine, 2009, IIBF, 2013, Aduda et
al, 2013). The paper succinctly highlights propositions of each of those theories respectively.
Agency theory originates from Adam Smith’s “Wealth of Nations” which was concerned with
separation of ownership and control of the modern corporation (Al Mamun et al, 2013; Gomez
et al, 2005). It was exposed by Alchian and Demsetz (1972) and further developed by Jensen
and Meckling (1976 as cited by Abullah and Valentine, 2009). The theory assumption is based
on the belief that there are two vital participants in the firm’s business relationship, the
principals and the agents. The principals are the owners (shareholders) of the organization
while the agents are the company executive and managers who are hired to run and make
decisions on behalf of the principals (Abullah and Valentine, 2009; Smith, 2011). The theory
suggests that as the agents operates the firm on behalf of the owners; they succumb to self-
interests and tend to use the opportunity for private gains rather than ensuring the creation of
wealth for the owners. This situation also leads to the agency problems including moral hazards
which consists of hidden actions and adverse selection that contains hidden information by the
agents towards the principals (IIBF, 2013; Heath, 2004). This assumption reminds the
principals to deploy appropriate incentives or bonus scheme for the agents (Duztas, 2008) and
at the same time the principals establish proper monitoring mechanisms (Al Mamun, 2013) in
order to control unacceptable behavior of the agents. Usually the monitoring mechanisms
include the outsider board of directors who tend to monitor the management of the agency
(Gomez and Russell, 2013; Aduda et al, 2013). Agency theorists also argue that the firm
problems result into agency costs that are unavoidable as the firm is run by the agents. Jensen
and Meckling (1976 as cited by Al Mamun et al, 2013) came up with three agency costs
including firstly the monitoring costs which are incurred by the principals (Pande, 2011).
Secondly, the bonding costs which emerge through mechanisms which are followed by the
agents to ensure that they align their interests with those of the principals (Henderson et al,
1992 as cited by Al Mamun et al, 2013). Residual losses are the third forms of costs which
275
refer to the loss experienced by the owners given that the agents always make decisions which
are contrary to the maximization of principals’ interests (Williamson, 1998 as cited Al Mamun
et al, 2013, Pande, 2011).
In contrast to the agency theory, stakeholder theory recognizes the fact that the organizations
should serve the interests of its stakeholders (Aguiilera, 2004). The theory assumes that the
corporation operates within larger systems of the host society which gives the legal and market
infrastructure for its activities and therefore it should create the value for its stakeholders by
changing its stakes into goods and services (Aduda et al, 2013). Stakeholders are defined as
any group or individuals who can affect or is affected by the achievement of corporation’s
purpose (Freeman, 1994 as cited by Pande, 2011) . The corporation should be accountable to
this broad range of stakeholders (Abdullah and Valentine, 2009). No matter how useful it is,
the theory has been criticized of engaging business organizations in a multiple of objectives
which sometimes becomes no objectives and jeopardize organizational performance (Aduda et
al, 2013).
Stewardship theory differs from the agency and stakeholders theories and considers the
management of the corporations as stewards who performs their duties and responsibilities in
the best interests of the shareholders (Donaldson and Davis, 1991 as cited by Yusoff and Alhaji,
2002). Corporation executives have motivation to act in the best interest of the owners so as to
realize the higher-order -needs like achievement and self actualization unlike those who work
under the agency theory by struggling to earn lower level needs like pay (Duztas, 2008).
According to this theory it is important not to control the top management since it is formed by
the stewards who do their roles in the interest of the owners through firm performance (Gomez
and Russell, 2005) contrary to the beliefs of the agency theory. The board composition under
the steward theory seems to encourage the insiders approach as well as the CEO duality practice
to provide clear leadership in the organizations (Donaldson and Davis, 1991as cited by Aduda
et al, 2013, Abdullah and Valentine, 2009).
Unlike the stewardship theory, the resource dependency theory is based on the belief that there
should be an environmental linkage between the organization and the outside resources
( Yusoff and Alhaji, 2002). The organization needs directors who provide important resources
for its survival through their linkage to external environment (Abdullah and Valentine, 2009).
It originates from the open system theory and considers the corporate boards as means to
manage external dependency (Aduda et al, 2013). This theory encourages organizations to
appoint the representative of independent organizations from outside in order to help the firm
to gain access to resources which are critical to the corporate prosperity. To this point, it is
argued that (CG) in the developing world exists upon many theories which have been referred
276
as theoretical pluralism (Stiles, 2001; Roberts et al, 2005 as cited by Yusoff and Alhaji, 2002).
The theories used in the developing world to explain corporate governance in the organizations
are derived from the developed world. Though Mulili and Wong (2010) advocate for a different
(CG) models in the developing world but the two worlds have similar issues to (CG) despite
of all sorts of differences between them. The usage of these theories also is defendable
following the rise of globalization, liberal economy and the critical emphasis on the
corporations to meet value creation of the owners and stakeholders in both worlds. However,
all the theories combined together can prescribe well (CG) in the developing world.
Figure 1: Corporate Governance Theoretical Framework.

Agency Cost
Stewardship Corporate Stakeholder

Theory Governance Theory
Resource
Dependency
3.2. Relationship Between (CG) and Organizational Performance in Developing World
Several studies have used broad (CG) indices consisting of the board of directors and firm
ownership structure. Each of these indices of (CG) consists of several variables as measured
by the organizational financial performance (OP) as defined on the appendix. A study by Vo
and Phan (2013) in 122 non-financial listed companies in Vietnam found that there was positive
correlations between the presence of female board members, CEO duality, boards working
277
experience and boards’ compensation with firms’ improved performance on Return on Equity
(ROE), implying that the more the board of directors diversity (Shungu et al, 2014), having
single individual acting as chairman of the board and CEO, old age of board members and their
remuneration all together had positive impact on (OP).
Marashdeh (2014) also studied 115 listed industrial and services companies in Jordan and
found a positive relationship between CEO duality and performance on ROE, Return on Assets
(ROA) and Tobin’s Q (TQ) market value based performance measure, implying that companies
which had CEO as chairman of the board performed well than those which separated the
positions. This study partly confirms Cyril (2008) study which found that among 30 large and
70 mid-sized listed companies retaining duality had better performance on ROA only while
those which separated the two position of CEO and board chairman had performed on ROE
than those which did not. Duke II and Kankpang (2011) came up with the findings of different
perspective. Their study found a positive relationship between separation of CEO position from
board chairman, Audit Committee and code of corporate governance with firm performance as
measured by ROA and Profit Margin (PM) among the 20 listed and the other 20 non-listed
companies in Nigeria. These results imply that organizational performance depends on
separation of CEO/chairman positions, appointing members of the Audit Committee and
introducing the code of corporate governance in the organization.
A study by Coleman and Biekpe (nd) was also conducted to find the relationship between (CG)
as measured by (TQ), (ROA) and Sales Growth Rate (SGR) among 16 non-financial listed
companies in Ghana. The study found that the more the organization had board composition
being dominated by the majority of external members, the more performance of the firm
worsened due to the grounds that they were part-time workers and shared commitment in their
duties and responsibilities. This finding is contrary to the previous studies which found that the
more outside members (non-executive directors) were deployed on board, the more the
organization performed due to the establishment of check and balance for board effectiveness
(Adebayo et al, 2013) while the independent members became true monitors who could
discipline the management and improve firm performance (Dutchin et al, 2010 as cited by
Adebayo et al, 2013). The study further found that the size of the board (small board) had
positive relationship with TQ and ROA but it was negatively related to SGR. The study partly
did not comply with the findings of Coleman (2007) who studied a total of 103 listed companies
in Ghana, Nigeria, Kenya and Johannesburg. The researcher found a positive impact between
large board size and independent directors on enhanced firm value on (ROA) and (TQ) while
on the CEO duality, the study did not find significant impact on (TQ). The study further found
that the CEO tenure in office enhanced firm profitability since the CEO experienced job
security and obtained an opportunity to witness the results of the decisions being taken in the
company (Vo and Phan, 2013). The board activity intensity according to the study had negative
278
effects on profitability probably because of agency costs in financing the board frequent
activities.
In respect to firm ownership structure, Marashdeh (2014) study found that managerial/director,
company, and foreign ownership were significantly related to ROE while individual/family,
government and concentrated ownership had negative relationship with ROE and ROA. The
study partly complies with Tanko and Kolawole (nd) argument that empirical studies have
established strong relationship between directors ownership of shares and firm performance on
ROE,PM, SGR, dividend yield (DY) and stock prices at the capital markets. Performance took
place because managerial ownership based on the agency theory, increased alignment of
interests between managers and shareholders (Marashdeh, 2014). The study also confirmed
Mang’unyi (2011) and Ongare et al (2011) studies in which the former found that the foreign
owned banks in Kenya had better financial performance on ROE and ROA as well than
domestically owned banks and the latter indicated that state ownership of firms had poor
stewardship whereas the diverse and institutional ownership gave the best results on ROE,
ROA and DY among the 42 firms listed on Nairobi Stock Exchange.
Figure 2: Conceptual Model of Corporate Governance on Organizational Performance

(OP)
(CG) ROA
CEO Duality ROE
Board Independence TOBIN’S
Board Diversity Q
Board Size PM
Board Activity Intensity (CG)

Company Ownership
Institutional Ownership
Foreign Ownership
Government Ownership
Concentrated Ownership
Family/Individual
Ownership
Note: Positively Related Negatively Related
279
4.0. Conclusion, Implications and Further Research
The paper has found multiple theories of (CG) being used in the developing world such as the
agency, stakeholder, stewardship and resource dependency theories as derived from the
developed world. The paper has also found that the influence of corporate governance variables
on organizational performance bring mixed results particularly those involving the board of
directors’ structures. As some studies found that the board of directors measures such as board
diversity, independent directors, board size (large boards), CEO duality, board experience,
CEO tenure were related to (OP), others fail to reveal significant relationship between many of
such (CG) measures with (OP) on ROE, ROA, DY, PM, and Tobin’s Q. There were agreeable
consistent results on the relationship between the firm ownership structures and (OP) since
most of the results revealed that the managerial/director, company, institutional and foreign
ownership measures were positively related to (OP) while individual/family, government and
concentrated ownership had negative results. Implication of the data from the literature
suggests that the developing world should continue to use the theories derived from the
developed world but yet a theory of (CG) emanating from its own surrounding is of urgent
need. The results further imply that despite of the mixed results between (CG) and (OP), it was
important for organizations to institutionalize (CG) measures preferably board diversity, small
board size, independent directors and CEO/chairman separation for improving (OP). These
measures would introduce gender and age representation, reduce agency costs, increase
effective monitoring of the top management and reduce conflicts of interest among the CEOs.
The paper also suggest more studies to be done on challenges associated to the usage of some
of these theories of (CG) and contrasting results on (CG) and (OP) justify more studies to be
done in order to verify the relationship between the two concepts by considering also other
factors which affect (OP).
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Appendix
Organizational
Financial
Performance Definition
Variables
Return on (Ratio of earnings before interest and taxes / total assets) x 100
Assets (ROA)
Return on (Profit after tax/shareholders’ fund or equity) x 100

Equity (ROE)
Sales Growth It is calculated by dividing difference between current sales and previous year’s sales
Rate (SGR) volumes by previous years’ sales volume
284
Earnings per Net income – Dividends on preferred stock / Average outstanding stock
share(EPS)
Profit Margin Is part of a category of profitability ratios calculated as net income divided by
(PM) revenue or net profit divided by sales.
Dividend Yield Is a stock ‘s dividend as percentage of the stock price

(DY)
DY= Annual Dividend/current stock price
Tobin’s Q It is the most frequent used valuation measure in empirical corporate finance. It is
named after the Nobel Prize Laureate James Tobin from Yale University. It is defined
as the ratio of market value to replacement value of a firm’s assets. As an
approximation, the market value of assets is normally computed as market value of
equity plus book value of assets, minus book value of equity. This is then divided by
the book value of assets to obtain Tobin’s Q. The ratio is expected to be greater than
unity as indication that management has done well in its investment decisions
market value of common stock
+book value of preferred stock
TOBIN’S Q = + book value of long term debit book value of total assets
285
TRACK 8
Marketing and Consumer Behavior
286
The Link between Entrepreneurial Orientation and Market Orientation,
and the Research Knowledge from Sub-Saharan Africa:
A Literature Review
Jan-Erik Jaensson
janerik.jaensson@out.ac.tz
Abstract
Two different concepts are frequently discussed in the literature claiming their impact on
performance of an organization: entrepreneurial orientation and market orientation. The
seminal articles and the development of the concepts are discussed in this paper as well as the
possible link between them. The research done in Sub-Saharan Africa about these concepts is
also presented. The result of the literature review shows that very few articles are published
about the application of any of the concepts in Sub-Saharan Africa. Another result is that there
are very few studies in the world where the two concepts are linked to each other. This paper
will contribute to the knowledge about the application of entrepreneurial orientation and market
orientation in the context of Sub-Saharan Africa, and the link between the two concepts.
Key words: entrepreneurial orientation, market orientation, Sub-Saharan Africa
Introduction
In this paper the link between entrepreneurial orientation (EO) and market orientation (MO)
will be discussed. Both concepts have a positive effect on performance according to the existing
literature. The question in focus for this paper is how the link between the two concepts are
presented and discussed in the literature (Boso et al. 2013; Chen & Hsu 2013; Hong et al. 2013;
Kajalo & Lindblom 2015; Kwak et al. 2013; Ramirez et al. 2014) , and how much research has
been done in Sub-Saharan Africa. EO is a concept developed from the strategic management
literature, and the first author dealing with it was Miller (1983). He discussed the need for
developing a concept dealing with entrepreneurial activities on a firm level. At that time
entrepreneurship at the individual level dominated the research. He came up with three
components to study entrepreneurship at a firm level: innovativeness, proactiveness and risk
taking. The dominating research results show a significant link between EO and performance
of the firm.
MO is a concept developed from the marketing literature and it is now considered to be the
implementation of the marketing concept. The first authors discussing MO was Kohli &
287
Jaworski (1990) and Narver & Slater (1990. The two research groups have a bit different
approach to the concept, but in both cases MO is supposed to enhance performance of the firm.
Since then the concept has been studied in different environments and in different organizations.
The statement from Kohli & Jaworski (1993) and Narver & Slater (1990) that MO is applicable
in every environment is so far valid except for the public sector. One question discussed is if
different business orientations (EO, MO, Learning orientation, Brand orientation etc.) have any
connections and/or how the different “orientations” are linked to each other (Mahmoud & Yusif
2012; Slater & Narver 1995; Urde et al. 2013; Wolf et al. 2015)? The theoretical gap discussed
in this paper is about the possible link between the two concepts MO and EO, which both have
a positive effect on performance (Atuahene-Gima & Ko 2001; Hakala 2011; Kajalo &
Lindblom 2015; Mahmoud & Yusif 2012; Ramirez et al. 2014).
Method
This paper is based on an extensive literature review. Articles have been searched for in
databases (Emerald and Taylor & Francis), with the following key words used alone or in
different combinations: entrepreneurial orientation, market orientation, profit, performance,
risk, innovation, environment, Africa, Sub-Saharan Africa, developing countries, Botswana,
Burundi, Gambia, Ghana, Ethiopia, Kenya, Namibia, Nigeria, Rwanda, South Africa, Tanzania,
Uganda, Zambia, and Zimbabwe. Many articles were found about MO but only a few studied
the phenomenon in developing countries and very few in Africa. Many articles were found also
about EO, but only a few studied this in developing countries and very few in Africa. One
common result was lack of studies in Africa and specifically in Sub-Saharan Africa. There
were only a few studies in the world studying the link between EO and MO which justifies this
study.
Manual content analysis was used to examine the content and concepts in the articles. Within
this method, relational analysis was performed using the two concepts to search for similarities
and differences between them.
Entrepreneurial Orientation
Entrepreneurial Orientation (EO) is a line of research built on entrepreneurship, but EO is

focused on the firm level as opposite to the individual level. Lumpkin & Dess (1996) make a
distinction between content (entrepreneurship) and process (EO). They further argue that new
entry explains what (content) entrepreneurship consists of but EO describes how (process) new
entry is done. Also Miller (1983) uses “what” and “how” to describe the difference between
them. It has been developed from the strategic management literature and the enhancement of
competitive advantage is a general assumption (Altinay & Wang 2014; Covin & Slevin 1989;
288
Gathungu et al. 2014; Le Roux & Bengesi 2014; Lumpkin & Dess 1996; Lumpkin & Dess
2001).
There are some different definitions of EO as for example Lumpkin & Dess (1996, p136): “the
process, practices, and decision-making activities that lead to new entry”. More recent definiti-
ons are from Avlonitis and Salavou (2007) “EO constitutes an organizational phenomenon that
reflects a managerial capability by which firms embark on proactive and aggressive initiatives
to alter the competitive scene to their advantage” (p. 567), and Wiklund & Shepherd (2005):
“a firm’s strategic orientation, including entrepreneurial decision-making and practices. It is
clear from most definitions that EO is considered to be a strategy where decision-making is
strongly emphasized.
The seminal articles are written by Miller (1983), who defined three dimensions:
innovativeness, proactiveness and risk taking. Later on Covin & Slevin (1991) and Lumpkin
& Dess (1996) continued with this line of research and named it “Entrepreneurial Orientation”,
which Miller (1983) actually never did. Lumpkin & Dess (1996) also added two dimensions to
the construct: competitive aggressiveness and autonomy. Most research has been dealing with
the link between EO and performance. The majority of the results also conclude that EO affects
performance positively (Lumpkin & Dess, 1996; Radipere, 2014; Wiklund & Shepherd, 2005).
However, some research has not managed to establish a strong positive effect (Lumpkin &
Dess 2001; Rauch et al. 2009).
There are some critiques about the EO concept mainly in three areas: the construct, the
moderating variables and the scales used to measure EO. The first issue is if it is a
multidimensional or a unidimensional construct. The unidimensional construct means that the
different dimensions should relate to performance in the same way. The more recent idea is
that the different dimensions could relate to performance in different combinations, a
multidimensional view. (Covin & Wales 2012; Rauch et al. 2009) There is also an existing
discussion about the effect of moderating variables on the link between EO and performance
(Rauch et al. 2009). There is no consensus among researchers about which factors affect this
link or how they affect the link. Maybe the lack of consensus about the effect of moderating
variables could explain why some research show no or little significance between EO and
performance?
Other critique is that there has been different number of scale items measuring EO across the
studies which makes them a bit difficult to compare (Rauch et al. 2009). A Likert-scale was
developed by Khandwalla already in 1977, and some years later it was refined by Miller and
Friesen (1978, 1982) and Covin and Slevin (1989). This is the most frequent scale used to
measure EO and it is commonly named the “Miller/Covin & Slevin scale”. There is also another
289
scale, the Hughes & Morgan (2007) EO scale (which includes all five components), but it is
not as frequently used.
The research front today deals with many issues like the following: 1) The effect of networks
on EO (Gathungu et al. 2014; Miller, 2011), 2) Moderating variables - internal and external
(Gaudici 2013; Ruiz-Ortega et al. 2013; Wong 2014), measurement (Covin & Wales 2012,
Miller, 2011), 3) SMEs (Ndubisi & Agarwal 2014; Wolff 2015), 4) The effect of culture (Al-
Swidi & Mahmood, 2011). 5) The link to Market Orientation is also an interesting research
area which is further discussed in this paper (Boso et al 2012; Chen & Hsu 2013; Hong et al
2013; Kajalo & Lindblom 2015; Miller, 2011).
The EO concept is developed from researchers in the western World and most studies have
been carried out there. They have developed the theoretical area and added valuable knowledge
to the world of research. However, for the sake of increasing knowledge and to develop it
further there is a need to look into other geographical areas and here we are going to add the
research done in Sub-Saharan Africa and its contribution to knowledge. Only a few studies of
EO have been conducted in Sub-Saharan Africa. Most of them are from South Africa and
Ghana, but there are also studies from Kenya, Ethiopia, Nigeria, Zimbabwe, and Tanzania. The
vast majority of the studies have been to investigate the relationship to performance, but there
are also single studies of networks, export, SME, Market Orientation and business start-up.
(Adegbite et al, 2008; Alarape, 2009; Boso et al, 2012, 2013; Callaghan & Venter, 2011;
Demsis, 2013; Fatoki, 2014; LeRoux & Bengesi, 2014; Radipere, 2014; Xaba & Malindi, 2010)
Some results from these studies are that Adegbite et al. (2008) found that the entrepreneurs in
Nigeria didn’t perform as expected in any of the three dimensions risk-taking, proactiveness
and innovativeness. The findings from Callahan & Venter support this and both studies
recommend entrepreneurial training. Another study from Nigeria (Alarape 2009) found that
environmental variables affected the dimensions. Boso et al. (2012) confirmed the link to
dynamism in the environment, and also the link to innovation. The link between EO and
performance is in general confirmed, but since the studies are few there is a need to increase
the knowledge base.
Market Orientation
MO is considered to be the implementation of the marketing concept and many articles have
been published about this since the beginning of 1990. The seminal articles in this area are
written by Kohli & Jaworski (1990), Narver & Slater (1990) and Kohli & Jaworski (1993).
They defined the core components of market orientation, but from different perspectives and
they also defined some antecedents. There are two different set of core components identified
1) customer orientation, competitor orientation and interfunctional coordination (Narver &
290
Slater 1990) and 2) intelligence generation, intelligence dissemination and responsiveness
(Kohli & Jaworski 1990). The first one focuses on the coordination and use of the information
from customer and competitors. The second one focuses on the organization-wide collection
and generation of market information and the response to the collected information. The
common issue is the collection and response to market information.
Studies about MO from a marketing perspective reveal that in most cases it has a positive effect
on performance (concerning both hard and soft measurements) and as such the concept is
interesting both for academicians and practitioners. (Boso et al. 2012; Boso et al. 2013; Brettel
et al. 2012; Kohli & Jaworski 1990, 1993; Narver & Slater 1990; Slater & Narver 1994). Two
dominating measurement tools are used in this research area: MARKOR and MKTOR.
MARKOR was developed by Kohli et al (1993) and adopt an organizational perspective on
MO. MKTOR was developed by Narver & Slater (1990) and adopt a more customer oriented
perspective, linked to their different opinions about MO presented above.
MO has developed in many different areas since the seminal work in the 90s of which some
examples will be presented below. One research area is to study the moderating/mediating
variables of MO. Variables studied are for example competitive environment, learning
orientation, turbulence (environmental and technological), Innovation/New Product
Development (NPD). Learning orientation (adaptive learning) and innovation/NPD have a
significant effect on the relation between MO and performance, but for competitive
environment and turbulence the results are mixed. (Atuahene-Gima & Ko 2001; Baker &
Sinkula 1999; Boso et al. 2012; Brettel et al. 2012; Chen & Hsu 2013; Deshpande et al. 2000;
Narver et al. 2004; Narver & Slater 1994; Newman et al. 2016; Slater & Narver 1995)
Some limited critiques on MO exist and it is mainly about three topics: the applicability in the
public sector, the applicability for SMEs, and the relation to other orientations, For the first the
applicability in the public sector have caught some research interest and the dominating critique
is that the concept is too focused on creating economic values and on consumer needs and
wants. This is not the main objective of most public organizations and as such the MO concept
is not fully applicable. They also argue that the concept is mechanistic and lack a real
interaction perspective. In this area it seems that the applicability of MO is less valuable.
Furthermore the applicability on public organizations in developing countries is more or less
dismissed. (Gromark & Melin 2003; Rodrigues & Pinho 2012). The second applicability
critique is that the development of the concept is done from the large firm’s perspective. Here
the problem is that most companies in the world are SMEs and they have not the same
organization structure or the resources needed to implement and follow the concept. Some
researches argue that there is a need for modification to fit the conditions of SMEs (Blankson
et. al. 2006; Raju et. al. 2011). The third critique is that the link to other orientations is unclear.
There are many different “orientations” both in management research and in market research.
291
However it is unclear how the different orientations are linked to each other (entrepreneurial
orientation, learning orientation, brand orientation, strategic orientation, innovation orientation,
technology orientation, etc.). Some studies have tried to bring clarity between these different
orientations to find out how/if they have similarities and if they could be implemented and
work together. (Boso et. al. 2012; Fang et al. 2012; Gromark & Melin 2003; Hakala 2011;
Hong et. al. 2013; Kajalo & Lindblom 2015; Mahmoud & Yusif 2012; Kwak et.al. 2013; Urde
et. al. 2013).
The research front today deals with a number of issues summarized in these five areas: 1) The
applicability on SMEs (Hinson & Mahmoud 2011; Jaiyeoba 2011; Kajalo & Lindblom 2015;
Raju et al. 2011; Ramirez 2014), 2) MO and customer satisfaction (Guo & Wang 2015; Jalali
et al. 2013), 3) The link between innovation and MO (Atuahene-Gima & Ko 2001; Boso et al.
2012; Brettel et al. 2012; Hong et al. 2013; Dibrell et al. 2011; Newman et al. 2016), 4)
Emerging economies and MO (Boso et al. 2013; Charles et al. 2012; Hinson & Mahmoud 2011;
Jaiyeoba 2011; LeRoux & Bengesi 2014; Mahmoud & Hinson 2012), 5) The relation to other
orientations (Boso et al. 2012; Fang et al. 2014; Hong et al. 2013; Kajalo & Lindblom 2015;
Kwak et al. 2013).
The starting point for the development of the concept is from the western World and the
existing conditions there. Those studies have given a large contribution to the research area and
created much knowledge about the concept and its pros and cons. To develop the knowledge
base further, studies about MO in other parts of the world has been conducted and we will here
continue with studies from Sub-Saharan Africa. Unfortunately, only a few studies of MO have
been conducted in Sub-Saharan Africa. Most of them are from Ghana and Nigeria, but there
are also studies from Kenya, Botswana, Ivory Coast and South Africa. The vast majority of the
studies have been investigating the relationship of the concept to performance, but there are
also some studies of SME, public sector, and export. (Boso et al, 2013; Charles et al, 2012;
Chelariu et al, 2002; Jaiyeoba , 2011; Jaiyeoba & Amanze, 2014; Hinson & Mahmoud 2011;
Kuada & Buatsi, 2005; Loubser, 2000; Mahmoud & Hinson, 2012; Mbah et al, 2007; Nwokah,
2008; Ofoegbu & Akanbi, 2012; Osuagwu , 2006; Osuagwu & Obaji, 2009; Opoku & Essien,
2011)
Some results from the above mentioned studies are as follows: The study by Boso et al. (2012)
confirms the importance of MO in a dynamic environment and its effect on innovation.
Jaiyeoba & Amanze (2014) found that the Narver & Slater components were more applicable
in the Botswana setting. Mahmoud & Hinson (2012) concluded that MO was not applicable in
the public organizations in Ghana. Mbah et al. (2007) found that the environment was a strong
variable affecting the implementation of the concept in Nigeria. In general the studies confirm
the relationship between MO and performance, but since there are so few studies from this
292
geographical area we need more studies to expand the knowledge and to contribute to the
development of the concept.
The link between EO and MO
According to the literature, both EO and MO are supposed to enhance the performance of a
firm, and some articles discuss them together. MO is discussed from the marketing literature
to have a positive impact on performance. It is described to be concentrating on serving
customer needs. However, since the focus is on the response to articulated customer needs it
risk missing the opportunity to develop new products or services that are more than incremental.
(Atuahene-Gima & Ko 2001; Hakala 2011)
EO on the other hand is discussed from the management literature to have a positive impact on
performance. It is described to be concentrating on aggressive product and market innovation
with a high degree of risk involved and the success is often a game changer in the market.
However, this orientation risk to be too technological driven and therefore the risk is high to
produce new products or services that will be failures. (Atuahene-Gima & Ko 2001; Hakala
2011)
EO could be classified as an inside-out process where the firm lead the customers, contrary to
MO which can be classified as an outside-in process where the customers lead the firm in
market and product development. In this respect they are complementing orientations to each
other and if used simultaneously they will work together for the best of the firm. However,
there are some important differences between the concepts in the following areas: Customer
needs, Innovation, Risk-taking, Environmental change, and Performance achievement.
To start, the customer needs are addressed in different ways, for MO it is all about matching
customers expressed needs and nothing else. EO on the contrary concentrates on customer
future needs through new product/service development and new markets. (Atuahene-Gima &
Ko, 2001; Baker & Sinkula 1999; Slater & Narver 1995)
The innovation aspect also differs, and MO is more about incremental innovation and
exploitation of innovations while EO is about exploration innovation process with high degree
of innovativeness often introducing breakthrough products or identifying unattended market
segments. (Atuahene-Gima & Ko, 2001; Baker & Sinkula 1999; Hakala 2011)
The risk-taking aspect of business is discouraged in the MO concept but encouraged in the EO
concept. This is linked to the innovation area where EO innovations are on a higher risk level,
but could give the firm a more substantial return on investment. (Slater & Narver 1995)
293
The MO concept advocated a reactive approach towards environmental change while EO is
focused on a proactive approach to the change. Here we clearly could see the more active
approach of EO compared to the reactive MO concept. (Atuahene-Gima & Ko, 2001; Baker &
Sinkula 1999)
Given these differences presented above, the interesting question is if the two concepts really
could operate simultaneously independent from each other, if they operate together in some
form of relationship or if they are separate concepts which could not operate together?
(Atuahene-Gima & Ko, 2001; Boso et al. 2013; Chen & Hsu 2013; Hakala, 2011; Hong et al.
2013; Kirca et al. 2005; Ramirez et al. 2014; Slater & Narver 1994; Rauch et al. 2009)
Some researchers argue that they could operate simultaneously and state that you get the best
performance result when both MO and EO are high, especially in a developing country context
and where the social and business network ties are well developed (Boso et al.2013). The effect
on new product development is also studied with regards to EO and MO, and the result is that
high levels of MO and EO generates a high level of new product performance (Atuahene-Gima
& Ko, 2001). One study further argues that the performance are better if MO and EO works
together, but they need marketing capabilities to utilise their full potential among SMEs (Kajalo
& Lindblom 2015)
Atuahene-Gima & Ko (2001) classifies firms depending on high or low degree of MO and EO,
their adaptability and their environmental managemet capability. Their research confirmed that
the concepts work together and that firms with high level of both MO and EO are better in new
product performance than any other group of firms, so they state that the concepts could work
together and also reinforce each other.
Kajalo & Lindblom (2015) also argues that the two concepts could work together and the
statement is also supported by research of MO in a resource based view perspective. In this
research the assumption is that MO is an intangible resource focusing on the capability to
process market information and as such it is a key market-based knowledge asset. This
knowledge will be of high importance when developing new products, creating new innovative
combinations and entering new markets as expected from the EO concept.
The literature review did not find any studies which clearly states that MO and EO could not
work together. With the few studies discussed we could so far state that the concepts seem to
complement each other rather than be competitors in the organization.
294
Conclusion and implications
The main conclusion after the literature review is that the concepts probably could co-exist
because the difference between them regarding innovativeness, risk-taking, customer needs etc.
indicate that they complement each other rather than compete, and there could be a positive
relationship between them. How the relationship works with respect to performance is still
unclear and it is an area which deserves more attention.
To straighten out the relationship much more research is needed where both concepts are
studied simultaneously, in different industry settings, in both product and service producing
firms, in large as well as small firms, with both qualitative and quantitative methods, and in
different cultural settings.
The latter is especially needed in countries in Sub-Saharan Africa, where there is a huge gap
of knowledge both about EO and MO and of cause the relationship between them in this context.
The business environment in these countries is underdeveloped and in some cases the
uncertainty is high regarding both regulations and trust. The knowledge about these concepts
alone and in combination is very low in this region.
It is hard to find an explanation to why so few studies has been carried out in this geographical
area, but with more and more interest in the world of emerging African business and especially
the interesting positive macro economic development in East Africa we might see a number of
studies about MO and EO in the future. In any case there is a giant need for researchers to
explore the applicability of these concepts in a Sub-Saharan (African) environment to develop
the concepts further and to add more knowledge.
One implication of the study is that managers should adopt both MO and EO to increase
performance. New product development also seems to be more successful with the adoption of
the two concepts, since they together are concerned with both the internal and the external
perspective. However, internal and/or external environmental factors could affect the outcome
of performance.
*The reviewers gave more very useful comments which will be taken care of after the
conference to develop the paper further.
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Handling Customer Complaints for Loyalty in the Services Sector: Case of
Mobile Telephone Companies in Uganda
Mabel Birungi Komunda, PhD

Makerere University Business School, Uganda
mbirungi@mubs.ac.ug
Abstract
This study focuses on the concept of customers’ complaining behaviour in the mobile telephone
company sector. The mobile telephone company in Uganda is competitive and being a service
sector, it is complex in nature. A descriptive cross-sectional survey was used. Primary data
were collected using questionnaires from Makerere University mobile telephone subscribers
who were students, academic staff, administrative staff and support staff. Stratified random
sampling was used and the study used cross sectional survey method. A sample of 384 was
used in the study where a response of 332 was attained, with 86% response rate. A pilot study
was done. Data were analyzed using descriptive statistics, correlations and regression analyses.
The results of the study revealed that customers’ complaint behaviour influences customer
loyalty. Further, the results revealed that service quality directly influences customer loyalty
and also has a positive significant relationship with customers’ complaint behaviour. The study
has made contribution to theory, policy and practice in relation to customer complaint
behaviour and to marketing in general. The study offered further clarification into the
relationship between customers’ complaint behaviour and customer loyalty. The limitations of
the study included the selection of the study variables which was not exhaustive. On the one
hand, the cross-sectional survey research design was used where the study was carried out at a
specific moment in time and, as a result, causality can only be inferred from these data.
Keywords: Customer Complaint Behaviour, Mobile Telephone Services, Short Message

Service
Background of the study
From the 1990s, the telecommunications sector has become a dynamic research area for both
the developed and less developing countries (LDCs). This is the result of technological changes
resulting in mobile telephone services as well as of the increased number of network operators
and the intense competition. These factors are a consequence of the removal of monopoly rights,
which were mainly enjoyed by state-owned operators of public telecommunication networks
like the former Uganda Telecommunication. There is an increasing economic importance of
the mobile telephone companies and these have inspired many management scholars to devote
more research attention to this sector.
303
Basing on telecommunications services it is frequently pointed out that once customers have
been acquired and connected to the mobile telephone network of a particular operator, their
long-term links with the local operator are of greater importance to the success of the company
in competitive markets. However, there are more activities on winning customers than retaining
them in the mobile telephone companies (MTCs) of Uganda regarding the networks like giving
free air time, free SMS and free internet services and these provide economic rewards to
lengthen customer relationships. However, the argument is that a dissatisfied but complacent
customer is unhappy and may be disloyal (Tronvoll, 2012).
During the past decade, mobile telephone companies have changed not only at the corporate
and business levels but also in terms of consumer engagement. The companies have introduced
the use of electronic commerce activities like making telephone calls, using short message
services (SMS), using internet services and sending/receiving money using mobile telephones.
While such changes have facilitated innovative business strategies, they have also created many
challenges to the user experience. Mobile telephone companies in Uganda are faced with the
problem of increasing competition leading to fear of losing customers to competitors. These
companies are concentrating on strategies to win customers which may have an influence on
customer loyalty. Gee et al. (2008) assert that the mobile telephone industry has not been
analyzed in the context of customer complaint behaviour with respect to its integration with
customer loyalty. Knowledge about these variables may help to identify common service
challenges like managing CCB to achieve customer loyalty (Tronvoll, 2012).
Literature Review
Nature of Customer Complaint Behaviour
Customer complaint behaviour refers to the responses triggered by perceived dissatisfaction

that is neither psychologically accepted nor quickly forgotten in consumption of a product or
service (Homburg and Fürst, 2005). Research by Casado, Nicolau and Mas (2011) suggest that
customer complaint behaviour (CCB) is a complex phenomenon which is reflected in the
number of alternative definitions proposed to explain this kind of behaviour. The common
determinant of complaining behaviour was described as dissatisfaction due to inadequacies of
integrity, reliability, responsiveness, availability and functionality (Tronvoll, 2012). Hence,
consumer dissatisfaction is a result of the discrepancy between expected and realized
performance (Gruber, 2007). Dissatisfaction is based on disconfirmation of expectation (Oliver,
1999) and it is a customer experience that is less than the perceived expectation.
Tronvoll (2012) described CCB as a function of dissatisfaction. Homburg and Fürst (2005)
assert that dissatisfaction is a significant factor that attributes to complaints. Kau and Loh
(2006) articulated that dissatisfaction was caused by negative disconfirmation of purchase
304
expectations that led to legitimate complaint behaviour. Many studies concerning consumer
satisfaction and dissatisfaction have employed the disconfirmation paradigm (Oliver, 1999).
According to this paradigm, consumer satisfaction or dissatisfaction is a function of perceived
discrepancies between prior expectations of the product or service and its actual performance
(Oliver, 1999). Consumer complaint behaviour is linked to negative disconfirmation – whereby
the perceived performance falls short of expectation, causing the consumer to become
dissatisfied. The disconfirmation paradigm was the basis of Hirschman's (1970) theory
concerning exit, voice and loyalty – which provides a theoretical framework for understanding
consumer complaint behaviour. According to Hirschman's (1970) conceptualisation, a decrease
in quality of a product and service leads to an increase in consumer dissatisfaction. The model
suggests that “exit” or “voice” is dependent on the degree of consumer loyalty. One of the main
goals of Hirschmann's (1970) study was to understand why dissatisfied consumers choose to
complain – as opposed to switching, engaging in negative word of mouth (WOM) comments,
or doing nothing. Hirschman hypothesised a three-level model in which consumer response to
perceived dissatisfaction was the dependent variable. Hirschman suggested that consumer
response to decreased quality was a function of certain consumer characteristics and the nature
of the industry.
Further, Kivela (1999) examined the disconfirmation effect on satisfaction and its impact on
return patronage and found that they were related to the post-purchase behaviour such as bad-
mouthing or taking no action. In addition to this, an evaluation of costs and benefits about a
complaint is another factor that turns an affective dissatisfaction into an action. If the costs and
time spent on a complaint are perceived as exceeding the benefits as a result of a complaint,
customers will tend to remain silent and take no action (Day and Landon, 1977). Non-
complainers considered that complaining was done by people with little else to do and believed
that it would be futile (Kau and Loh, 2006).
Complaining can be defined as a formal expression of dissatisfaction with many aspects of

service experience (Nyer, 2000). Customer complaints is further defined as an action taken by
an individual which involves communicating something negative regarding a product or
service or to some third party organisational entity. By complaining, customers can search for
different possible outcomes which can be combined together. When customers decide to
complain, they have previously passed through two distinct steps already identified by
Hirschman (1970): they value positively the balance between costs and benefits. Both costs
and benefits are not only economic, but also psychological (Andreasen, 2001). It is clear that
the perceived benefit may not be big enough to lead a consumer to complain, even if
considerable dissatisfaction exists. On the contrary, a consumer can complain even with a low
level of dissatisfaction if the perceived benefit is remarkable (Day and Landon, 1977); they
value worthwhile the complaining action because they esteem positively the likelihood of
305
obtaining a favourable solution. So, a dissatisfied customer may voice a complaint, exit or
remain committed to the company (Hirschman, 1970).
Demographic Variables and Customer Complaint Behaviour
Some of the demographic variables were found to be related to complaint behaviours. Female
customers are more inclined to complain (Kau and Loh, 2006) and tell others if they are
dissatisfied with the complaint handling (Oserankhoe and Komunda, 2013). These results
contradicted the findings by Manikas and Shea (1997) that the male customers complained
more than the female. Further, Jacoby and Jaccard (1981) found out that customers with a
higher education were more likely to complain. Heung and Lam (2003) and Ndibusi and Ling
(2005) pointed out that education was one of the significant characteristics of complainers. It
appears that subscribers with a higher education are more likely to complain when they are
dissatisfied because better educated mobile telephone company (MTC) subscribers may be
more knowledgeable about their rights as consumers and the method of redressing their
complaint if they are not satisfied with the purchase (Heung and Lam, 2003). Day and Landon
(1977) stated that those who publicly complained were younger in age and had a better
education and higher income. Beardon and Mason (1984) identified similar results and pointed
out that complaint behaviour was inversely related to age and positively linked to income and
education. Demographic variables such as income, education level and age are found to have
consistent impact on consumer complaint where consumers who chose to complain were found
to be relatively younger, with higher income and more educated (Heung and Lam 2003;
Ndibusi and Ling, 2005).
Despite the strategic importance of listening to and managing CCB, the current understanding
of managing customer complaints like poor network quality, poor customer care and lack of
explanation about service failure is limited (Tronvoll, 2012). Reviewing literature reveals the
major gaps: firstly, most literature focuses on identifying determinants of customer complaint
behaviour. Secondly, the role of attitudinal and perceptual variables has not been the focal point
in explaining CCB; and most studies focus on CCB as an outcome. The inconsistent
relationship between attitude and behaviour explains why CCB cannot be accounted for fully
by attitudinal and perceptual variables in consumer behaviour theories (Parasuraman et al.
2005). This calls for the integration of variables of CCB and customer loyalty where customer
loyalty is a dependent variable.
Customer Loyalty
306
Despite the failures, customers may still remain loyal to the purchase and use of the company
services. Loyalty refers to the situation in which the customer decides not to complain, but
stays committed to a service or to a product accepting silently and passively its decline. It is
important to underline that the word loyalty has, in this case, no moral or positive value. This
means that a customer is loyal, despite the problem experienced and the consequent
dissatisfaction, especially when there is no available alternative. Loyalty is one of those
cognitive, non-behavioural reactions which can affect consumers' perception of the problem
up to denying that dissatisfaction exists (Rowley, 2005). Loyalty is therefore determined by
the strength of the relationship between relative attitude and repeat patronage.
Customer loyalty is critical to conducting business in today's competitive marketplace, and the
mobile telephone company setting is no exception. Researchers argue that there must be a
strong attitudinal commitment to a brand for true loyalty to exist (Reichheld, 2003). This is
seen as taking the form of a consistently favourable set of stated beliefs towards the brand
purchased. Such attitudes may be measured by asking people how much they like the brand,
feel committed to it, will recommend it to others and have positive beliefs and feelings about
it – relative to competing brands (Uncles et al. 2003). It is believed that the strength of these
attitudes is the key predictor of a brand's purchase and repeat patronage. In other words, loyalty
depicts the extent to which a customer regards him/herself as loyal, the customer's willingness
to recommend the service company to others, and his/her intention to continue to use the mobile
telephone company services in the future. However, customer loyalty is not easy to maintain,
rather it is vulnerable, where even satisfied customers may defect to get better value,
convenience or quality elsewhere. Loyalty is important for the future of the company (Ehigie,
2006). While sustainers attract and retain the customers, vulnerabilities pull the customers
towards a substitute (Rowley, 2005). Customer loyalty is vulnerable because even if customers
are satisfied with the service, they continue to defect if they believe they can get better value
elsewhere. Many debates are centred on what customer loyalty actually is. As Gee et al. (2008,
p. 360) state: “Loyalty is a complex multidimensional concept”; it is behavioural, attitudinal
and a combination of both. The contextual area of the study on customer loyalty was mobile
telephone subscribers (MTS).
Mobile Telephone Services Sector in Uganda
In the last decade, the technological development and liberalised economy led to a change from
land line technologies to mobile telephone communication in many parts of the world,
including Uganda (Uganda Telecommunications Sector Report, 2005). Traditionally, mobile
and land phone providers competed ‘fiercely’ for new customers. Over time, and with the
increased saturation of the market, companies have come to realize their performance can
improve by focusing more on retaining customers than constantly acting in a conquest mode.
There are four mobile telephone competitive operators namely the Uganda Telecom, Mobile
307
Telephone Network, Orange Uganda, Airtel Uganda (Market Review, 2009). The quality level
of service providers of mobile telephone companies and the services they provide influence the
consumer's choice of the operator. According to Uganda Communications Commission (UCC)
- Uganda Telecommunications Sector Policy Review (2005), the parameters on which a mobile
telephone company can provide quality services include network and service accessibility,
access delay, voice quality and short message service (SMS). Mobile telephone service
providers need to continuously assess whether the quality of the designed service they offer
matches clients’ expectations (Byarugaba, 2010).
Mobile telephone services include making telephone calls, internet services, short message
services (SMS), storing data and sending and receiving money. Four mobile money operators
have been registered as a means for bringing about greater financial inclusion to the unbanked
(Uganda Budget report, 2011/2012). There is increased saturation of the market in mobile
telephone (Market Review, 2009), and companies in Uganda need to realize that their
performance can improve by focusing more on retaining customers than constantly acting in a
conquest mode.
Further, it can be analyzed that companies cannot completely eliminate the possibility of
service failures (Hess et al. 2003). However, what is important is how companies recover from
service failure. Recovering effectively from service failures contribute to positive customer
evaluations of organizations. Responding effectively to consumer complaints can have a
dramatic impact on repatronage intentions and the spread of negative WOM (Gruber et al,
2007). However, customer loyalty is not easy to maintain, rather it is vulnerable where even
satisfied customers may defect to get better value, convenience or quality elsewhere. Yet
loyalty is important for the future of the company. While sustainers attract and retain the
customers, vulnerabilities pull the customers towards a substitute (Rowley, 2005). Companies
need to work towards attracting and retaining customers through handling customer complaints.
This is because complaint handling has been recognized as a critical task for service managers
in MTC services.
Methodology
The proposed study used the descriptive cross sectional design and inferential statistics.
Descriptive statistics aim to summarize a sample, rather than use the data to learn about the
population that the sample of data is thought to represent. A cross sectional approach was used
because it facilitates data collection from different respondents at one point in time (Babbie,
2010). Further, the population of the study embraced the subscribers to mobile telephone
service operators who were students and staff of Makerere University. The total population of
Makerere University was 50,949 (academic year 2011/2012) mobile telephone subscribers.
Further, the sampling techniques used was stratified random and purposive sampling. The unit
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of analysis was the subscribers to mobile telephone companies, specifically Makerere
University students and staff and the researcher ascertained proportionate representation of the
sample size for the two categories of respondents. A list of all students and staff in Makerere
University was got from the Human Resource Office and registrars offices of Makerere
University and was used to determine the respondents for the study and every fifth person was
selected as a respondent. Data was collected and analyzed using SPSS 19.0 and involved
descriptive statistics, correlations and regression.
Demographic characteristics
The demographic factors of the respondent were an important measure to try to understand the
issues about CCB of the individual subscribers. Relevant results for gender, age bracket,
education level acquired and marital status of the respondent are presented. The age of the
respondent was an important measure to try to understand the issues about customer complaint
behaviour of the individual subscribers. Relevant results for demographic characteristics.
From the survey, most subscribers to the mobile telephone companies of Makerere University
fall within the age bracket 20-29 with 57%. This means that the majority of respondents mainly
fall in the age group of students. The lowest response was within the age bracket of 35 and
above with 21.7%. All respondents were twenty and above years of age, which implies that the
respondents were mature enough to abely respond to questions in the study. This is because the
respondents had adequate knowledge about the operations and services of MTC and therefore
the responses of the subscribers are considered to be adequate. Basing on the gender of the
subscribers to MTC, most subscribers by gender were male (55.2%) and the female were 44.8%.
These results were confirmed by the findings of Manikas and Shea (1997) who concluded that
male customers complained more than their female counterparts. In earlier surveys, Kau and
Loh, (2006) contradicted the findings that majority of female complainers was more likely to
voice their complaints than their male counterparts. This contradiction needs further research.
In a nutshell, the study is consistent with the existing literature where customer complainers
have been typified as being young with higher than average income and education (Heung and
Lam, 2003).
Further, respondents were required to indicate their level of education basing on certificate,
diploma, undergraduate, masters and the Doctor of Philosophy (PhD). Majority of respondents
were at undergraduate level, explaining 48.8% and the least was PhD level with 4.5%. The
mobile telephone subscribers surveyed were therefore people with different levels of study
from the certificate up to the PhD level. This gives confidence that the understanding of the
variables of study were not biased to any single level of education. Kau and Loh, (2006) assert
that customers with a higher level of education were more likely to complain, with the
explanation that better educated customers may be more knowledgeable about their rights as
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consumers, and the method of seeking redress. Note that findings have been fairly consistent
with age, income and education as credible determinants of consumer propensity to complain
(Heung and Lam, 2003).
Findings
Correlation analysis was run using Pearson Product Moment Correlation Coefficient technique
to establish the relationship between customer complaint behaviour and customer loyalty. The
results are presented in tabular and graph formats and discussed in line with the literature in
order to establish the extent to which they relate to existing knowledge. The correlation
coefficient provided a numerical summary of the direction and strength of the linear
relationship between the variables. All the pearson correlation coefficients (r) ranged within -
1 and +1. The correlation between the dependent and independent variable is in Table 1:
Table 1: Correlations between Study Variables
Customer
Complaint Customer
Behaviour Loyalty
Customer Pearson Correlation 1

Complaint
Behaviour Sig. (2-tailed)
Customer Pearson Correlation .260** 1

Loyalty
Sig. (2-tailed) .000
**. Correlation is significant at the 0.01 level (2-tailed).
Source: Primary Data
From Table1, the bivariate correlation analysis was used to establish both the direction and
magnitude of the relationship between the study variables. The results indicate that the
relationship between customer complaint behaviour and customer loyalty of MTC subscribers
310
was moderate, positive and statistically significant. To assess the CCB and customer loyalty
relationship, the following hypothesis was tested.
H1: There is a significant relationship between customer complaint behaviour and

customer loyalty.
The hypothesis of the study sought to establish the relationship between customer complaint
behaviour and customer loyalty. There was a moderate, positive and statistically significant
relationship between customer complaint behaviour and customer loyalty of mobile telephone
subscribers. Bivariate correlation analysis was used to establish both the direction and
magnitude of the relationship between the study variables. From the Table 1, there was a
positive significant correlation between customer complaint behaviour and customer loyalty
(r=.260**, P-value =000). The findings mean that with an improvement in CCB, this will lead
to an increase in loyalty of the customers supporting hypothesis 1. The findings imply that CCB
improvement will lead to improved customer loyalty. This association of customer complaint
behavior and customer loyalty implies that with increase in voicing, seeking redress and
commitment of customers, then customer loyalty may be attained.
The finding means that CCB will lead to an improvement in customer loyalty, which signifies
that seeking redress, voicing complaints and commitment to services of the operators are
associated with loyalty of customers to the mobile telephone subscribers. In a nutshell, there
was a positive significant relationship between CCB and customer loyalty. Apart from the
direction, the correlation provided information on the strength of the relationship and the size
of the absolute value as indicated.
The linear regression was used to assess the ability of CCB to predict customer loyalty. The
regression was preferred because it allowed the assessment of an independent variable on
prediction of the dependent variable. Therefore, after entering the independent variable in the
model, the overall model was evaluated basing on its ability to predict the dependent variable
(customer loyalty). The results of the regression of customer loyalty on customer complaint
behaviour are in Table 2.
Table 2: Regression of Customer Loyalty on Customer Complaint Behaviour
311
R R2 F Sig. Constant B Se β t
(P) (Beta)
CCB (H1) .263 6.9% 24.267 .000 2.329 .260 .060 .263 4.926
B = Unstandardised coefficient; se = standard error; b is standardized coefficient;
Dependent Variable: Customer Loyalty
Independent Variable: Customer Complaint Behaviour
Source: Primary Data
Table 2 provides the model summary of CCB and customer loyalty where the coefficient of
determination (R2) under model 1 was .069 which meant that the independent variable (CCB)
explained 6.9% of the variations in customer loyalty, with 93.1% of the variations remaining
unexplained. This signifies that the selected independent variable had little explanatory power
of the dependent variable. Therefore, there was a statistically significant linear relationship
between CCB and customer loyalty (β = 0.260, p< 0.05) and hence the study supported
hypothesis H1. Regarding customer complaint behaviour, respondents were required to
indicate the percentage level of CCB. The influence of CCB on customer loyalty was low as
the model accounted for only 6.9% variability (R2 =.069).
The resulting linear regression model that can be used to predict the level of loyalty for a one
standard deviation improvement in the performance level of customer complaint behaviour can
be expressed as: CL = α +β 1X1 +ε1, Where CL refers to customer loyalty (dependent
variable); α is a constant, β1, is a coefficient of determination (coefficient in values)
X1 – X2=customer complaint behaviour construct;
CCB=customer complaint behaviour; ε1 = error term
Model: CL=2.329 + 0.260CCB+ε1, p< 0.05, R2= 6.9% ..............................(1)
Model 1 had R2 = 6.9%, which meant that model 1 explained 6.9% of the variation in customer
loyalty. The model therefore provided a relatively weak fit because it only explained 6.9% of
the variation in customer loyalty basing on model 1. Basing on ANOVA, the model had F-
value of 24.267 and P-value = .000. This means that the model was statistically significant at
α = 0.05 level in explaining the simple linear relationship between customer complaint
behaviour and customer loyalty.
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The study examined the coefficients of determination of customer complaint behaviour and the
standardized beta coefficient .260 represented the expected improvement in customer loyalty
for a unit standard deviation improvement in the performance of CCB. It implies that, other
factors constant, a one standard deviation improvement in customer complaint behaviour
would raise the level of customer loyalty by a factor of about 0.069 of a deviation. The
regression results indicate that CCB positively influences the level of customer loyalty. P-value
= .000, this means that CCB had a significant relationship with customer loyalty and therefore
the hypothesis 1 which tests the relationship between customer complaint behaviour and
customer loyalty was supported.
Discussion and Conclusion
The study established a positive and significant relationship between customer complaint
behaviour and customer loyalty of Mobile Telephone subscribers, and the goodness of fit was
weak. This implies that customer complaint behaviour was correlated with customer loyalty
and the results indicated a positive and significant relationship between the study variables.
The significant relationship between CCB and customer loyalty suggest that for MTC to
achieve customer loyalty, they ought to seek redress and voice their complaint, meaning that
they could complain when the MTC is the source of disappointment, seek for an apology,
explanation, compensation, discount from the MTC why there was a dissatisfaction and their
expectations were not met. This happens when complaining becomes easier and redress
becomes more certain, that consumers may be more likely to speak up and raise their concerns.
There was a significant relationship but with a weak fit. This is because there are some
dissatisfied customers who do not even voice their complaints but just keep fairly committed
to the MTC by partly subscribing to the company services as well as to other competitor’s
services. Mobile telephone operators provide a variety of services like sending mobile money,
SMS, data, etc. The subscriber keeps using one or some of the services of the operator and not
the others where there was dissatisfaction. On the other hand, when the MTC has often been
offering qualitative services, the one off time service failure will not lead to subscribers exiting
or un-subscribing from the MTC. This is because they already have a positive attitude towards
the company. From the survey, there was a weak correlation on exit. This means that some
MTC subscribers whose expectations are not met may exit from the MTC. Such happens when
MTC subscribers make a mental judgement of ‘worth it’ or ‘not worth it’; where they may
conclude that complaining is not worth the effort and they may choose other means of dealing
with their unhappiness like exit. This study is consistent with the existing studies which show
that some dissatisfied customers complain (Osarenkhoe and Komunda. 2013), but some think
the problem is permanent and unchanging and decide not to complain, rather they exit the
service instead (del Rio-Lanza, 2009).
313
MTC in Uganda which have not handled customer complaints to the satisfaction of the
customers lose customers to competitors. Customer dissatisfaction to MTC services and poor
handling of complaints may threaten the long-term survival of the organisation (Michel et al.
2009). However, the mobile telephone companies which carry out effective complaint handling
may attain customer loyalty through customer retention and positive word of mouth.
Unfortunately, dissatisfied and disappointed customers may not complain because they wish
to avoid confrontation with the person responsible for the failure (Michel et al. 2009); they may
be uncertain about their rights and the obligations of the organization, or because of concerns
about the time and costs associated with complaining (Heung and Lam, 2003). On the other
hand, when dissatisfied consumers fail to tell management about something that went wrong,
the company stands to lose because such customers may simply disappear, defecting to
competitors, spreading negative WOM to friends and family members, and denying the
company an opportunity to correct mistakes it will probably repeat. Komunda and Osarenkhoe
(2012) add that the degree of success of service recovery may depend on the type of service
involved, the type of failure that occurred and the speed of response to service recovery.
In a nutshell, mobile telephone companies (MTCs) should have a positive approach to dealing
with customer complaints like “a complaint is gold” to help maintain relationship with the
mobile telephone subscribers and generate positive communication about the company for
image creation and consequently customer retention. This implies that management should
encourage dissatisfied customers to complain to express their feelings and suggest how best
they would want their problems to be addressed. Management of MTCs should provide timely
convenient channels for mobile telephone subscribers to express their disappointment about
the service failures. Basing on the limitation to the study, cross sectional research design was
used as a cost and time saving method (given the time constraint of the study) but it may limit
deeper investigations of many other possible causal relationships in the study. Consequently, a
longitudinal study would provide more insightful findings of the study.
Recommendations
It is recommended that:
Management should encourage customers to complain when they are dissatisfied in order to
understand their feelings and establish how best to address them. Otherwise, most customers
are eager to discourage family and friends from using the MTC services if their complaints are
not handled well.
The MTC should give incentives for subscribers who complain like free air time and short
message services.
314
Further, the mobile telephone company should record all subscribers’ complaints and
effectively communicate them to the staff to avoid re-occurance.
As a policy issue, MTC should recruit staff who have (but not limited to) soft skills like talking
nicely to both fellow staff and the MTS and having good interpersonal relationship. The target
should be to work towards both winning and retaining MTS by creating a good impression
through friendly interactions.
Management of mobile telephone companies should put in place avenues for promptly
addressing customer complaints where customers can easily voice out their complaints, like
customer care centres.
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Website Attributes And User Perspectives Of E-Tailing Firms In Port-

Harcourt, Rivers State, Nigeria
Ozuru, Henry N., PhD

317
Department of Marketing, Faculty of Management Sciences, University of Port Harcourt,
Choba, Port Harcourt. Oscap2003@yahoo.co.uk
Akahome, J. E., MBA, M.Sc

Federal University, Otuoke, Department of Entrepreneurial and Skill Development, Faculty
of Business Administration, Bayelsa State. Joyakahome@yahoo.com
Abstract
The paper empirically investigated website attributes and user perspectives of E-tailing firms
in Port Harcourt, Rivers State, Nigeria. The study population is made up of one hundred and
fifty (150) undergraduate and graduate students of the Faculty of Management Sciences,
University of Port Harcourt, Choba that are confirmed regular online shoppers. Sample size of
(108) using Krejcie and Morgan (1970) in Serekan, (2003). 108 copies of questionnaire were
administered to respondents. Data cleaning revealed ninety six (96) useable copies for analysis
using Kendall’s Correlation Coefficient with the aided of Statistical Package for Social
Sciences (SPSS) version 20. The study found a weak positive and non-significant relationship
between site complexity and requirement period, acquisition period, customer-interaction and
acquisition period of website attributes and user perspectives of e-tailing firms in Port Harcourt;
while hypothesis three indicated a weak positive and significant relationship between customer
interaction and requirement period of e-tailing firms. It concludes that the dimensions of the
predictor variable - site complexity, acquisition period and requirement period have weak
positive and non-significant relationship while customer interaction, requirement periods have
weak positive and significant relationship. The paper recommends that management of the e-
tailing firms invest more resources to enhance website quality.
Keywords: Website attributes, Site complexity, Customer Interactions, Requirement periods,

and Acquisition periods.
Introduction
With the rapid growth of internet and market globalization, firms now adopt new information
and communications technology to enhance their performance, and to utilize the wide business
opportunity brought up by the inception of internet (Hongxiu and Reima, 2009). Internet has
totally or almost removed the barrier of distance and times, making the world to become an
integrated community where buyers and sellers interact and disseminate relevant information
in a twinkle of an eye (Saba, 2011). It becomes a matter of necessity for organization that deal
online to pay keen attention to their customers’ perception towards their services and their
servicescape (i.e., the totality of the environment in which a service occurs). As a result of the
developments and advancements in web technologies, users have made significant shift from
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the simple, static websites to those of dynamic and rich websites that have the capability to
interact with users in a more sophisticated manner. In the words of Mishra and Mathew 2013,
worldwide e-commerce has tremendously increased the interactive media in Retail Group. The
interactive media report group indicated that the total number of internet users will continue to
rise as technologies continue to change (IMRG report 2012).
Websites are online environment where online consumers visit to make requests, purchases,
payment, lodge complaints, book flights and serve as the interactive situation or the interface
between online consumers and service companies (Author’s observation, 2016)..
The paper observed that, Jumia is Nigeria’s number one online retailer founded in 2012 by
Tunde Kehinde and Raphael Afaedor with product ranges from electronics, fashion, home
appliances and kid’s iterms. Headquartered in Lagos, Nigeria, with a total number of 1800
employees. Jumia now has warehouses in ten other countries like Egypt, Morocco, Kenya, Cote
d’lvoire, Uganda, Ghana, Cameroon, United Kingdom, Tanzania, and Angola.
Konga.com is konga’s website, founded July the year 2012 by Sim Shagaya with headquarters
at Yaba Lagos, and 700 employees focusing in merchandise in the Baby, Beauty, and personal
care products.
Alibaba Group Holding Limited, a Chinese e-commerce company founded in 1999 by Jack Ma,
providing consumer-to-consumer, business-to-consumer and business-to-business sales
services, electronic payment services, a shopping search engine and data-centric cloud
computing services through its web portals (www.aliexpress.com).
In today’s global community, the Web has transformed the way organizations do business as
well as its business environment. This transformation may be noted as a change agent in
business environment. It is therefore no doubt that web activities in commercial organizations
as in e-tailing firms are growing day by day in line with traditional business organizations
(Author’s observation, 2016).
In Port Harcourt, several companies such as Jumia, Konga, Alibaba express, etc are using the
web in providing product information, customer service, and assistance in acquiring the
products or service. Customers use these websites to make purchases of products or services
that are needed in their day to day activities. These sites actually can demonstrate growth as it
shows the degree to which their sites are evolving and showing the level of interaction with
their customers as well as addressing customer needs (Author’s observation, 2016).
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However, it is against these backdrops that the researchers seek to empirically investigate the
influence of website attribute on users’ perspective of E-tailing firms in Port Harcourt, Rivers
State.
Research Problem
The problem of this study is directed at ensuring whether websites attributes of e-tailing firms
such as Jumia, Konga and Ali express enhances user perspectives of e-tailing firms in Port
Harcourt, Rivers State.
Objective of the study
The objective of this paper is to empirically determine the extent to which website attributes
and user perspectives increase students online shopping with e-tailing firms in Port Harcourt,
Rivers State.
Study variables and Research framework
Our predictor variables is website attribute with its measures as site complexity and customer
interactions, while the criterion variable is user perspectives with its measures as requirement
period and acquisition period. These variables attribute and explanations are as follows:
Website attributes: Website attributes is known as a website characteristics or features of a

website believed to appeal to customer during times of usages.
Site Complexity: This deals with websites that do not bear on the users’ satisfaction or
friendliness when using the website to shop online.
Customer interactions: The process of having a close buyer-seller relationship during purchase
periods on the website.
Requirement Periods: This involves the periods to display photographs of products, video
presentations, descriptions, articles and reviews for uses.
Acquisition periods: This period demonstrates online order entry, credit card encrypayment,
online services etc.
Functional Relationships and Model Specifications
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In the context of functional relationships, the study’s objectives are to show functional
relationships amongst two measures of predictor variables – site complexity and customer
interaction and for the criterion variables – requirement periods and acquisition periods. This
study is only developing a functional relationship rather than model specifications. The
functional relationships for the study are as indicated below:
UP= f (WSA) …………………………………………………………….… (i)
WSA= SC, CI …..……………………………………………............….… (ii)
UP = RP, AP ……………………………………………..……….……….. (iii)
Where:
UP = User Perspectives
RP = Requirement Period
AP = Acquisition Period
WSA = Website Attributes
SC = Site Complexity
CI = Customer Interactions
Theoretical Foundations
The historical foundation of internet enabled businesses or electronic commerce (E-commerce)

cannot be completely stated without mention of about Richard Sears, a telegraph operator who
in 1886 sold all his watches through the use of telegraph system (Ozuru and Kalu, 2011). The
growth of technology including computers, internet, smart phones and tablets allow users to
access information whenever and wherever as marketing communication can be targeted
effectively in 24 hours a day (Baker, 2003). National statistics (2013), identified that in 2013,
36 million adults (73%) accessed the internet everyday in Germany with 20 million more than
in 2006. These records shows that as internet are fast growing, the users are also increasing at
similar range.
Internet shopping or purchasing items through the use of electronic device is credited to Tim
Berners-Lee who first created the world wide web (www) server and browser in 1990 which
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later became opened for commercial use in 1991 (Palmer, 2007). He further indicated that
intershop in Germany was first introduced in 1994, while Amazon launched its online shopping
site in 1995 followed by e-bay.
Online shopping was developed in March 1980, by an English Entrepreneur, Michael Aldrich
(1996) who launched the Redifon’s Office Revolution that allowed consumers’ distributor etc
to be connected online, making it possible for business transactions to be completed through
electronic devices (Aldrich, 2011). In 1994, online banking followed and the opening of an
online puzza shop by Pizza Hut owned by an Italian emerged. Also, Netscape introduced
Secure Socket Layer (SSL) encryption to transfer online data making online shopping secure
for shoppers.
Also in Nigeria, the first online bookshop known as Debonair bookstore was established in
2005 by Adebola Omololu as the first online bookstore with the major aim of tackling
challenges in relation to High price, lack of original books and accessibility
(www.google.com/search?q=debonair%20book%20store)
Conceptual and Operational Framework

User Perspectives
Website Attribute
(WSA) (UP)
Ho1 Requirement Periods

Site Complexity
(RP)
(SC) Ho2
Ho3
Customer Interactions Ho4 Acquisition periods
(CI) (AP)
Fig. 1: Conceptual and Operational framework on Website attributes and User Perspectives of
E-tailing firms in Port Harcourt, Rivers State.
Source: Desk Research, 2016
Research Hypotheses
Premised on our research framework, the below hypotheses are formulated:
Ho1: There is no significant relationship between site complexity and requirement period of
websites attributes and user perspective of e-tailing firms in Port Harcourt, Rivers State.
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Ho2: There is no significant relationship between site complexity and acquisition period of
websites attribute and user perspectives of e-tailing firms in Port Harcourt, Rivers State.
Ho3: There is no significant relationship between customer interaction and requirement periods
of website attribute and user perspectives of e-tailing firms in Port Harcourt, Rivers State.
Ho4: There is no significant relationship between customer interaction and acquisition period
of website attribute and user perspectives of e-tailing firms in Port Harcourt, Rivers State.
Review of Relevant Literature
Percentage of Online Shoppers in Nigeria
In looking at behavior, it is clear that an increasing number of consumers in Nigeria visit the
internet to buy goods and services for their consumption, while some do shopping, many others
prefer to get the information of a product online and make use of it to shop offline (Chioma,
2015). The number of users of the internet global system for mobile communication (GSM) in
Nigeria has increased from 76,322,802 in 2014 to 81,892,840 in January, 2015 (NCC Report,
2015)
Chioma (2015), further asserts that the interest in online trading in Nigeria is on the rise even
as the e-commerce resolution continues to witness improvements, especially in the payment
systems which have become safer and more secure, and has largely attracted a significant
number of prospective online sellers. Below is a demographic illustration for online shoppers
in Nigeria.
Table 1: Percentage of Online shoppers by age groups in Nigeria
S/No. Ages Percentage (%)
1 18 – 24 21
2 25 – 34 48
3 35 – 44 18
4 45 – 54 8
5 55 – 64 3
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6 65 and above 2
Source: Chioma, (2015). blog.kaymu.com.ng/ng/kaymu-com-ng-release-white-paper-on-e-

commerce- Market-trends-in-Nigeria
The table above shows the age group that is interested in online shopping in Nigeria.
From the table above, about 48% are between the ages of 25-34. From this figure, it is clear to
agree that the younger ones are more interested in buying online and individuals older than 65
are less interested in shopping online and probably prefer shopping offline or are not interested
in shopping at all.
The Concept of Website and its Attributes
It is generally vital that online marketers as well as retailers should endeavour to know the
elements that enhance trust among potential users. For instance, business owners that
completely depend on pure website based transactions; a good design of the website is of
paramount importance in order to enhance user perspectives (Mishra & Mathew, 2013). Due
to the advancement emanating from web technologies and how people have accepted its
adoption, website has shown important change from simple and static websites to that of
websites in dynamic, multiple media, rich websites that is able to communicate with visitors in
special ways. Since the inception of websites, its layout has tremendously widened in its width
and height to accommodate larger displays like consumer products/services. The websites
layout has been made easier in other to provide more comfort for shopping, reading and
navigating the site etc. For a website to achieve its purpose, it must begin with an attractive
site, be user friendly, faster booting time and loading (Ozuru et al. 2011). Companies’ websites
must have user friendly websites to allow users with the opportunity to go through webPages
with less effort in using. Further, a well built website must be readily available to accommodate
large number of customers as such must serve as a linkage between service providers and users
need to be conducive for transactions.
Having a website to operate an online service is one thing, and having a quality website to be
successful in the business is another vital area. Therefore, looking at e-tailing perspectives,
website quality should be viewed in consumer’s perception of overall quality of the website
(Hsuan et al, 2011). The website quality of a web page significantly portrays factors that can
influence online shoppers. In Nigeria, organizations like Konga, Jumia, Ali-Express, OLX etc
would want the quality of their webpages to portray important factors that can influence online
shoppers. It is also vital for these organizations to enhance the feature and information content
of their websites, because a quality website attracts users’ attention and make them regularly
visit the website for purchases. Further, Shergill et al (2005), holds that website design is
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amongst the dominant factor that influences user perceptions of online purchases. In the same
vein, Poddar et al. (2009), posits that a well designed website serves better to its intended
audiences, and that a quality website drives the users to always be willing to visit the site
regularly and prefer to stay longer at the website if it is attractive. As such, having a quality
website is one of the important factors that have the most influential effect on online shopping
(Shergill et al, 2005).
Generally, user’s perception with regard to the overall quality of a website that could be
regarded as website quality has also emerged as important determinant of consumer intention
to purchase or not to (Poddar et al, 2009). Martinez-Lopez et al (2005), further holds that
website quality is amongst the strongest influence on consumers’ attitudes or intention to shop
online.
Similarly, the key to a successful online shopping depends largely on how the quality of the
website is, believing that the overall website quality of a web page should be one of the most
important factors that influence online shopping (Shergill et al, 2005). For instance in Nigeria,
if a Konga, Jumia, and Ali-Express customer open their web page and find it lacks vital
educative information, he or she will quickly switch to another site and such user may not be
interested in visiting that site again.
Therefore, it is very vital for organizations like Jumia, Konga, Ali Baba Express, in Nigeria etc
to design their websites in an attractive manner in order to win and build customer loyalty
(Grandon et al, 2002). In understanding the importance of website attributes, organizations that
do business online (marketers and e-tailers) should develop the habit of identifying the
elements that enhances trust among potential customers. Some website attributes include the
site complexity, customer interaction, site’s usability, how credible the online vendor is,
content with its aesthetics area of presentation online, third party approval and endorsements,
as well as the marketing mix elements (Loebbecks, 2003); Chen and Chang, 2003; Demangeot
and Broderick, 2007).
Further, decisions taken by the retailer regarding design of the website influences user
perception of the retailer along with their desire to continue to shop at those internet sites
(Zhang and Von Dran 2000; Jarvenpaa and Tractinsky 1999). Zhang et al (2001), holds that
consumers often times view design attributes of web-stores in different form based on the type
of product or service provided within the sites. Also, how a user perceives the design to the site
and it’s quality have become important signals of how much the retailer is trusted, and as such,
building user intentions to make purchases from the site (Mcknight et al. 2002).
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Fogg et al. (2002), holds that users used the design appeal of a website as the most visible cue
evaluating the website’s credibility. It is obvious that the more the on-site resources of an e-
tailing, the greater the ability to attract and at the same time retain customers.
Service, another website attribute known to e-tailing users assists in establishing trust similar
to those of physical store customers. For example constant customer service is a vital attribute
to online marketers (Lohse and Spiller, 1998).
Finally, looking at the relative importance of some aspects of website attributes such as security,
privacy, convenience, ease-of-use, privacy and security features were known to be of less
importance.
Site Complexity, Customer Interaction and Ali-Express
If a website becomes difficult to use by customers, it therefore become complex and lacks the
characteristics of user friendly. This paper observed that Ali Express’s site is quite complex,
because it includes icons that for a new individual to the site, he or she may find it difficult to
conclude a transaction and also the fact that concluding a transaction involves payment, and
some time the payment process becomes very rigorous although the rigor are security and
privacy based.
The site www.aliexpress.com is one of the online shopping malls, with its market base designed
to cover some parts of the world especially Europe, China and some other selected countries
in Africa, with its sister site alibaba, alimama, alitelecom.
In terms of site complexity, aliexpress is observed to be too detailed, making users find it to be
a bit complex during shopping process. The paper further observed the sites home page is not
so attractive to attract new buyers to shop on the site, and when moving further on to click and
browse the site, it becomes more detailed with very low loading speed even with the fastest
network system or the choice of browser. Inspite of its site complexity, the paper further
observed that Aliexpress offers a wonderful customer interaction services, offering a close
buyer-sellers interactions on its website. For example, a buyer on aliexpress site is always given
the opportunity through instant messaging to interact with the company’s sellers on various
product characteristics that might not be clear to him/her before making purchases online. In
terms of order processing, the paper observed that the site provides a clear shipping directives
interms of price of different logistics’ company to users destination along with consumer
protection that comes in two forms (as a full refund in cases where users orders were not
received and or kept, incase the items ordered for were not the described or desired type;
delivery time well stated and strictly adhered to).
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Site Complexity, Customer Interaction in Jumia and Konga
The paper also observed that Jumia’s website is complex to navigate while shopping as it takes
several minutes just to load the home pages. Ordinarily, one might think it’s a network issue,
but visiting other sites with similar contents, it clearly revealed it had nothing to do with
network rather, the problem is seen as emanating, from the website’s complexity.
Also, in terms of customer interaction for jumia, the paper observes that a customer who has
issues with items purchased will have to call its customer agents and wait on the cue before he
or she is be attended to (the customer is charged for these calls) or he/she may have to send an
email which may take a while to be responded to, and sometimes conflicting responses on
email are common. This is also same with konga but, seems to respond in a more swift way to
issues than jumia arising from purchases issues.
The site www.konga.com is another online site for online shopping in Port Harcourt. The paper
observed that with site complexity, the site is beautifully and colorfully arranged in an attractive
manner that readily catches anyone’s attention to its pictures of products, price tags and most
interestingly, the shops at which these products are gotten from.
The paper further observed that during Page Loading, Konga’s site has a high loading speed
even with the poorest network system or choice of browser, and it loads its pictures clearly
with the impact of loading time so satisfying despite the web-traffic.
Within the context of customer interaction the paper observed that, in terms of Order
Processing on the site, a sign-up page with a valid phone number and house address are clearly
and well stated for the user. After completing this process, the delivery man checks the list on
your address and where the address is not too familiar with him/her, the office calls the user to
go to their nearest pickup centers to pickup his/her order, and if the users address is well known,
the delivery is concluded at the users door step with a charge. However, contrary to this process,
it’s stated that delivery is free.
During customer complaint, if a problem exists, users have the opportunity to call their head
office and if the complaint concerns delivery, customer service instructs that delivery within
Lagos is free, but outside Lagos, there is a delivery charge for it; with a delivery time outside
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Lagos 7days, though after the shopper must have ordered, while within Lagos it is within
24hours after users order have been taken.
Both Konga.com as well as Jumia.com are still struggling in the area of customer interaction.
Other than the fact that they bombard one with automated emails on their product offerings on
a daily basis; e-mais are not responded speedily, even when such e-mails are sent during
business hours. The paper further observed the existence of the live chat feature but, it is
constantly offline or unavailable. One can’t get them to help or assist one via the web instantly
unless one calls their customer care lines on the phone, thus, incurring more cost to the
customer.
The paper also observed situations where after ordering and getting a confirmation email from
them, it took about 24hours before getting informed that the item seen on their catalogue and
ordered for was out of stock.
In the case of returned goods or items; even after sending them the required email with details
of the returned item(s) and reasons for the return, one would have to consistently call to remind
them before one gets attended to.
Moreover, they hardly call to inform website users of any delays arising in the course of
shipping. Even when they do, it comes several days after the damage has already been done.
The Concept of User Perspectives
The perception of users to any organization such as e-tailing existing in Nigeria is of vital
importance. This impinges on how users or online shoppers perceive the website, effective
delivery of online products, their perception of goods or services delivering become very
important as it contributes enormously to the success or failure of the online business (Kim et
al, 2002). For instance, online users are more satisfied when they receive the right quality and
quantity of products/services that was ordered within the time frame as promised by the e-
tailers, and where this expectation falls short, the consumer develops negative perception
regarding such goods or services (Kim et al. 2008).
Childers et al. (2001), holds the opinion that perception towards intentions to shop online are
not only affected by requirement period, acquisition period, perceived-ease-of-use, perceived-
usefulness or perceived risk but such factors as consumer traits, situational factors, product
characteristics, previous online shopping experiences and trust can affect the intention of the
users shopping online. For instance, in Nigeria most users loose their trust in using internet for
shopping due to the fact that their private information may be disclosed to a third party the
419ers or hackers.
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Similarly, the perception of users in online shopping depends largely on the direct effects of
relevant web contents establishing that in online transaction, the web features can either be
users’ perceptions of functional and utilitarian dimensions, for instance ease-of-use and
usefulness, or more so, their perceptions of emotional and hedonic dimensions such as
enjoyment as well as consumer behavior (Menon et al. 2002).
Requirement Periods: This period in an e-tailing environment that involves presentation of

product photographs, video or audio presentations, textual descriptions, articles or reviews,
explanations, and downloadable demonstration files. Within this period, the e-tailing firm
communicates these vital information about the product or service to the shopper.
Acquisition Periods: At this period, the user is wholly assisted in acquiring the product or
service that is needed.
These periods are vital because if these services are not as promised, the online shopper sees
mistrust on the side of the e-tailing firms and may not visit the website for any purchase. If the
online shopper perceives the site to be trusted and reliable, he/she revisits and make more
purchases. On the contrary, where the online shopper perceives the information provided by
the online business owner, he/she withdraws from visiting or revisiting the firm.
Requirement Periods, Acquisition Periods and Ali Express
In terms of product requirements, aliexpress details product categorizations and rankings,

providing different sizes, colors, price tags, picture of the products, and at the same time,
educates users on how to get their size and usage of the product bought from their company.
When it comes to product variety, aliexpress site is second to none as it stocks a wide range of
products from different sellers, ranging from household office, recreation, company equipment,
special effects, accessories etc. Aliexpress offers wide range of product varieties and there is
nothing that cannot be found on aliexpress site.
Again, the paper observed that the acquisition period of the site is filled with stocks, as the site
is never out of stock of products as there are always different varieties of products, but it takes
a while for the site administrator to update new products/services on the company website.
Requirement Periods, Acquisition Periods with Jumia and Konga
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Both Jumia.com and Konga.com display their products on an online catalogue through clear
and colourful pictures. Followed by the brand name or seller’s name, the products name and
lastly the price. Clicking on any particular item users want, will navigate users to a different
page showing the picture in different angles, sizes of the product, seller’s name, a short
description of the product (which consists of the materials used in making the products, product
colours, product design, product quality), product details (which consists of information on
production country, product weight in kilograms, product types, styles and patterns, product
warranties), expected delivery time, and product reviews (how other users rate the product). In
most cases, most of the details one see online concerning any product are quite positive details.
There is hardly ever any well defined constraint associated with the use of any of these products.
Even the reviews one see are usually positive reviews. However, most of these products don’t
turn out to be so good after delivery, thus disappointing the customer at home.
The paper further observed that in terms of Product Requirements, Konga comes with poor
product/service categorization, as it is not well detailed to users and leaves the buyers with just
one option and no more. Traditionally, buyers want to see varieties of products that give them
the opportunity to make choice selections, and where this opportunity is lacking, it discourages
and turns off the buying mode of the online shoppers.
On the other hand, the paper observed that Jumia and Konga offers limited variety of products
such as electronics, phones, laptops etc that are also stocked from different sellers on the Jumia
and Konga websites.
Finally, the paper further observes that in terms of Acquisition Period, the site most times runs
out of stock of products, especially the most catchy item on the site, and takes months to update
their site with products.
Perceived-ease-of-use
Perceived-ease-of-use is the extent to which a user believes a system is easy to learn or easy to
use (Davies, 1989). In Nigeria, and other countries, when consumers perceive the ease nature
in using any system, such as these firms websites, they tend to continue using such system.
Davis et al. (1989), in the theory of Technology Acceptance Model (TAM) established that
when customers find that interaction with an online shopping website is easy to use, it can
affect perception positively. Perceived-ease-of-use has proven to have significant effects on
attitude or intention to purchase online (Venkatesh, 2000). In the viewpoint of Barkhi et al.
(2007), it is the ease with which the user obtains information or order products using the web
service.
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The Internet, unlike the physical store may raise concerns to users on how easy the system is
when shopping online, in order for the consumer to be addicted to this, it is established that
systems should be both easy-to-learn and easy-to-use, as these characteristics provide less
threat to customers. On the basis of the above discussion, it is concluded that perceived-ease-
of-use (PEOU) significantly affects online shopping (Moon et al. (2001).
Perceived-Usefulness
Perceived usefulness is seen as the user’s perception that by transacting online their
performance in using such system, will be enhanced. For example, the Nigeria online shoppers
when they consider the usefulness of any system as with Ali express, Jumia and Konga, may
want to revisit such site for their next purchase and, they tend to become loyal to such site
(Davis, 1989). Any business environment(s) that perceived to be usefulness had a strong direct
effect on an individual’s intention to shop online, as perceived usefulness influences the
acceptance and utilization of innovative information technologies (Lopez et al. 2008).
Thus, when users view the probability of shopping online to have increased their efficiency
and positively affect their entire purchase process, they prefer to acquire a product when such
system being perceived to be useful (Bhattacherjee, 2001). However, technology acceptance
model (TAM) strongly emphasizes the extent to which a system adds to the consumer’s job
performance (Davis et al. 1989).
Perceived-Trust
The importance of trust in business transactions in Nigeria and the world over cannot be over
emphasized. In most cases, lack of trust in online transactions in Nigeria results to users being
reluctant to adopt internet for their shopping, which in turn results to low adoption. The concept
of trust has varying definitions, for instance, Mayer et al. (1995), sees trust as the “willingness
to be vulnerable to another party”. However, Gefen et al (2000), examined trust in a broader
sense and stipulated that it is “the confidence a person has in his or her favourable expectations
of what other people will do”. Gefen et al. (2003), further defined trust as one’s belief that the
other party will behave in a dependable, ethical, and socially appropriate manner to be satisfied
without any fear in any transaction.
Any organization that users cannot trust to a certain degree will find it more challenging to win
their loyalty. Also, the competitive nature of business environments as in Nigeria today, trust
makes an organization to standout (Mayer et al. 1995). Trust is defined as when a party behaves
in a manner that is socially responsible and also believing that the party will behave in like
manner. Trust is the belief that the other party will behave in a socially responsible manner,
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fulfilling the trusting party’s expectations without taking advantage of the party (Jarvenpaa et
al. 2003).
Research Gap
Belanger et al. (2002) studied the relative importance of some forms of web attributes like
security, privacy, convenience, ease-of-use and found out that privacy and security issues were
of less importance than convenience, and ease-of-use when considering consumers’ intention
to purchase. Mishra and Mathew (2013), studied perceived risks of e-tailing in India and found
that respondents showed highest risk factors as it relates to product delivery of goods purchased
online.
However, none of these authors considered the relevance of web attributes and users
perspectives of e-tailing firms. Therefore, against this backdrop, the present studies seeks to
show the influence of web attributes on users perspectives of e-tailing firms in Port Harcourt,
Rivers State, Nigeria.
Methodological Issues
The purpose of the study is to examine online user perspectives of e-tailing firms in terms of
website attributes in Port Harcourt, Rivers State. The accessible population of the study consists
of one hundred and fifty (150) undergraduate and graduate students of the Faculty of
management Sciences, University of Port Harcourt that are confirmed regular online shoppers.
The sample size is made up of one hundred and eight (108) undergraduate and post graduate
students of the Faculty of Management Sciences, University of Port Harcourt, who are
confirmed regular online shoppers of the e-tailing firms Konga, Jumia and Ali-express. Using
Krejcie and Morgan sample size determination framework (Krejcie and Morgan), 1970, in
Serekan, (2003). With the use of questionnaire method, one hundred and eight copies (108) of
the questionnaire were administered to respondents, and after retrieval and data cleaning,
ninety six (96) copies were used for analysis. The study is a correlational work and the
Kenddalls statistical tool was used to analyze the raw data with the aid of Statistical Package
for Social Sciences (SPSS). The collected raw data were tabulated and evaluated with the
application of the 5-point Likert scale (Walton, 1975).
Table 1: Selected E-Tailing Firms in Port Harcourt, Rivers State, Nigeria.
Names of Selected E-tailing firms Locations Website

S/No.
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Jumia Lagos www.jumia.com.ng
2. Konga Yaba, Lagos Konga.com
3. Ali-Express Lagos Alibaba.com
Sources: Desk Research, (2016)
Data Presentation and Discussion of findings
The study data was analyzed based on its aim, to ascertain if there is a significant relationship
between these dimensions of website attribute and the measures of user perspectives, and the
direction of such relationship. The data from the analysis is showed below while conclusion
was made based on the findings.
Hypothesis One
HO1: There is no significant relationship between site complexity and requirement period of
Statistical Analysis for Hypothesis One
Table 1:Correlation Coefficient Result for Hypothesis One
Site Complexity Req. Period
Correlation Coefficient 1.000 .123

Site
Sig. (2-tailed) . .118
Complexity
N 96 96
Kendall's tau_b
Correlation Coefficient .123 1.000
Req. Period Sig. (2-tailed) .118 .
N 96 96
Source: Survey Data, 2016
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From the result of the above table, the correlation coefficient (r = 0.123) revealed that there is
a weak positive relationship between Site complexity and requirement period of e-tailing firms
in Port Harcourt, Rivers State.
Hypothesis Two
HO2: There is no significant relationship between site complexity and acquisition period of
Statistical Analysis for Hypothesis Two
Table 2:Correlation Coefficient Result for Hypothesis Two
Site Complexity Acq. Period
Site Complexity Sig. (2-tailed) . .455
N 96 96
Kendall's tau_b
Acq. Period Sig. (2-tailed) .455 .
N 96 96
From the result of the above table, the correlation coefficient (r = 0.061) revealed that there is
a weak positive relationship between site complexity and acquisition period of e-tailing firms
in Port Harcourt, Rivers State.
Hypothesis Three
334
HO3: There is no significant relationship between customer interaction and requirement
period of websites attributes and user perspective of e-tailing firms in Port Harcourt, Rivers
State.
Statistical Analysis for Hypothesis Three
Table 3:Correlation Coefficient Result for Hypothesis Three
Customer Req. Period

Interaction

Customer
Interaction
N 96 96
Kendall's tau_b
Req. Period Sig. (2-tailed) .020 .
N 96 96
From the result of the above table, the correlation coefficient (r = 0.186) between customer
interaction and requirement period revealed a weak positive relationship of e-tailing firms in
Port Harcourt, Rivers State.
Hypothesis Four
335
HO4: There is no significant relationship between customer interaction and acquisition period
of websites attributes and user perspective of e-tailing firms in Port Harcourt, Rivers State.
Statistical Analysis for Hypothesis Four
Table 4:Correlation Coefficient Result for Hypothesis Four
Customer Acq. Period

Interaction
Customer
Interaction
N 96 96
Kendall's tau_b
Acq. Period Sig. (2-tailed) .071 .
N 96 96
From the result of the above table, the correlation coefficient (r = 0.149) between customer
interaction and acquisition period showed a weak positive relationship of e-tailing firms in Port
Harcourt, Rivers State.
Conclusion and Implications
336
Each conclusion was made based on the result of test of hypotheses:
Firstly, the coefficient of determination (r = 0.015) indicated that only 1.5% of requirement
period is explained by site complexity. The significant value of 0.118 (p< 0.05) revealed that
the relationship between site complexity and requirement period is not significant. Based on
the outcome of the analysis above, we thus conclude that there is a weak positive and non-
significant relationship between site complexity and requirement period of websites attributes
and user perspective of e-tailing firms in Port Harcourt, Rivers State.
Secondly, the coefficient of determination (r = 0.00372) indicated that only 0.37% of

acquisition period is explained by site complexity. The significant value of 0.455 (p<0.05)
revealed the existence of a non-significant relationship. Based on the above therefore, the null
hypothesis two was rejected. Thus, we conclude that there is a weak positive and non-
significant.
Thirdly, the coefficient of determination (r = 0.0346) indicated that only 3.5% of requirement
period is explained by customer interaction. The significant value of 0.020 (p<0.05) also
revealed the existence of a significant relationship. Based on the result above, the null
hypothesis was rejected. Therefore, there is a weak positive and significant relationship
between customer interaction and requirement period of websites attributes and user
perspective of e-tailing firms in Port Harcourt, Rivers State.
Finally, the coefficient of determination (r = 0.022) indicated that only 2.2% of acquisition
period is explained by customer interaction. Also, The significant value of 0.071(p<0.05)
revealed the existence of a non-significant relationship. Based on the above, the null hypothesis
was rejected. Therefore, there is a weak positive and non-significant relationship between
customer interaction and acquisition period of websites attributes and user perspective of e-
tailing firms in Port Harcourt, Rivers State.
Recommendations
Management of the e-tailing firms should endeavour to better customer complaint handling
The management of Ali baba express, Jumia and Konga, Nigerian should design their websites
in an attractive manner in order to win and build customer loyalty.
In designing their website, the management of these e-tailing firms should avoid making their
sites complex that their actual customers may unknowingly recommend them to potential ones.
337
E-tailing firms’ management should build their sites with quality attributes that will motivate
their users to establish trust similar to those of physical store customers.
Implication of the Study
These recommendations should serve as an engine room to ensure that e-tailing firms enhance
the quality of their website, product improvement of customer requirement period, acquisition
period thereby leading to loyalty of online shoppers.
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Influence Of Relationship Marketing On Customer Retention In Tanzania
Luxury Hotels
Juliana G. Wildard
Dev Jani
John Philemon
University of Dar es Salaam Business School, Department of Marketing, Dar es Salaam,

Tanzania. Julswil2004@yahoo.com
Abstract
Despite the relationship between relationship marketing and customer retention being one of
the most central in marketing theory and practice, researches testing the relationship in luxury
hotels are limited and inconclusive. This study aimed at testing the relationship between
relationship marketing and customer retention in Tanzania luxury hotels. Five hypotheses
relating the dimensions of relationship marketing and customer retention were tested using data
collected through a self-administered questionnaire directed to the hotel customers who were
selected purposively within the vicinities of hotels. Results from multiple regression analysis
indicates service augmentation and internal marketing to be significant predictors of customer
retention while core services, relationship customization, and relational pricing not to be
significant predictors of customer retention. Practically, the results imply the need for hotels to
boost relationship marketing by capitalizing on service augmentation and internal marketing.
Despite the other three variables not being significant predictors of customer retention,
hoteliers should not overlook them as they might be important in creating synergy with those
factors that are observed to be significant.
Keywords: Relationship marketing, customer retention, Luxury hotels, Tanzania
Background of the study
Relationship marketing (RM) has become one of the most debatable issues and a focal point in
the business field (Rootman et al. 2011; Balaram & Adhikari, 2010; Dimitriadis & Steven,
2008; Ozgener & Iraz, 2006). RM is mainly based on the belief that establishing a sustainable
relationship with customers is the cornerstone for retaining customers who are much more
profitable than acquiring new ones (Buttle, 2009). RM philosophy stresses the need to shift
from marketing strategies which are based mainly on customer acquisition to one which focus
343
on customer retention (CR). CR is the heart of relationship marketing (Payne, 2000a) as mainly
concerned with keeping customers in the long term (Gronroos, 1997). It has also been shown
that customer retention can lead to various benefits to the firms, including higher sales, higher
profitability, lower cost of acquiring new customers and word of mouth recommendations
(Aggrey et al. 2014). RM as a part of marketing strategies seek to attract and keep customers
by providing quality services for them, and accordingly has turned into one of the secrets of
success in the turbulent markets (Niko et al, 2015)
Relationship marketing has been studied by various scholars. Rootman, Tait and Sharp (2011)
in their study on the influence of selected independent variables (communication,
empowerment, personalization, ethical behaviour, fees and technology), and customer
retention in banking industry in South Africa, they found that there is positive relationship
between relationship marketing and customer retention. In other studies, Payman et al. (2013)
found that the ability to provide tailor made services to guests was a major determinant of
customer loyalty in the luxury hotels. Dube and Renaghan (1999) found, in order of importance,
that quality of service and quality of the hotel’s personnel were critical determinants in
enhancing guests’ loyalty to luxury hotels. Bowen and Shoemaker (1998) developed the model
of service relationship in the United States, they also concluded that relationship marketing
resulted in continued patronage, less price sensitive clients, decrease in marketing costs, and
more importantly, contributed to the overall profitability of the luxury hotels. Furthermore,
several researches refer to the importance of making studies on relationship marketing
dimensions in the hotel sector (Akroush et al. 2011; Sadek et al. 2011; Sin et al. 2005).
Although there are many studies which reveal elements that make up relationship marketing,
they have shown inconsistent in the constructs. Evans & Laskin (1994) mention four
dimensions of RM (trust, competence, commitment and bonding). Berry, (1995; 2002) came
up with 5 dimensions (core service, service augmentation, relationship customization,
relationship pricing and internal marketing). Claycomb and Martin (2002) stated 18 dimensions.
Gronroos, (2004) viewed relationship marketing as containing of three dimensions; interaction,
dialogue, and communication. Ndubisi (2006) and Ndubisi and Wah (2005) provided four
dimensions (communication, competence, bonding and conflict handling) and six dimensions
(trust, competence, communication, conflict handling, commitment and bonding) respectively,
of relationship marketing. Therefore, in these few reviews, it shows that there is inconsistence
results on the RM constructs. This study borrowed Berry, (1995, 2002) constructs; core service
(CS), service augmentation (SA), relationship customization (RC), relationship pricing (RP)
and internal marketing (IM). The five constructs seems to be a bundle of intangible resources
of which according to Fahy and Smithee (1999) are inherently resistant to imitability and
substitutability, at least in the short run. On the other hand, Stauss et al. (2001), portends that
amicably retaining loyal customers for hoteliers is essential and a core factor in keeping the
industry in shape and competitive enough to level up the changing trends of globalization that
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has impacted such business and economic activities of the hotel markets. They added that,
customer retention becomes an essential phenomenon since the sector has witnessed substantial
growth, change, and competition both globally and domestically.
Furthermore, Dube and Renaghan (2001) contended that hotel industry is unique in its nature
which tends to be luxurious, service oriented and has strong emphasis on human exchange in
the service delivery process. Hotel customers, consume mixture of products and services and
the bill has covered tangible and intangible experience. The successful hotel does not count on
products and services but also qualities of staff and the way they deliver the service are more
important than the tangible products in making hotel experience satisfactory or unsatisfactory.
Chami (2010) contended that two ways communication is one critical factor which requires the
involvement and participation of both customers and service staff in the service delivery
process. Through interaction with customers, important messages about their needs and
expectations can be received by service staff for immediate actions to create customer
satisfaction. Interaction between internal staff or inter-departments is also critical since total
experiences of customer in using any lodging or food and beverage services usually involve
team work and exchange of information within the organisation Dube and Renaghan (2001).
Choi and Chu (2001) argued that hotel industry is high depends on repeated customers for
survival and that the management believe that the informal way of building friendships between
front-line staff and customers through high degree of personal attention and customization can
win the loyalty of customers in long-run no matter customer or staff are experiencing a diversity
in culture through interaction with others. Stockdale (2007) contended that, staff who work in
hotel industry always have interaction with customers from different cultures, therefore hotels
need qualified and trained staff. He added that since hotel industry is service oriented in its
nature, it is requires huge supply of labour to create a memorable experience of the customers.
For example, staff-to-guest ratios are high in a five star hotel which aimed at providing one-
on-one service to their customers. Again, although the advancement in technology do
contribute to the replacement of some simple tasks in the whole service process, customers
who concern the element of ‘care’ generally expect high degree of human contacts and
personalized services in their consumption experiences (Lo, et al. 2010). Nateh (2009)
contended that relationship marketing is for service industry especially the hotel sector. He
added that higher level segment of hotels is good for implementing and practicing relationship
marketing.
Inspite of the importance of RM in the hotels, Most of the studies on RM selectively focus on
some service sectors , such as banking (e.g., Akroush et al. 2011; Becker , Greve, and Albers
2009; Eid, 2007; Hussain et al. 2009; Krasnikov et al. 2009; Sin, Tse and Yim 2005),
telecommunication (e.g.,Almotairi, 2009; Beldi et al. 2010), healthcare (e.g., Bunthuwun et al.
2011; Hung et al. 2010), and contact center (Abdullatif et al. 2010). Palmer (1994), warned,
“relationship marketing means different things in different cultures and marketers should be
345
cautious on suggesting general solutions for exchange bases as shouldn’t develop common
products and promotion for all markets.”
In filling the research gap, this study had the general objective of examining the influence of
relationship marketing on customer retention in Tanzania luxury hotels. Specifically, the study
aimed at: assessing the relationship between core service and customer retention in the
Tanzania luxury hotels; to examine the relationship between service argumentation and
customer retention in the Tanzania luxury hotels, to determine the relationship between
relationship customization and customer retention in the Tanzania luxury hotels; Assess the
relationship between relationship pricing and customer retention in the Tanzania luxury
hotels; and to assess the relationship between internal marketing and customer retention in the
Tanzania luxury hotels.
Literature review
Relationship marketing in the luxury hotels
The basic philosophies of relationship marketing are based on the assumption that company-
customer interactions and strategies can earn and retain customers (Berry, 1995; 2002).
Gronroos, (1994) defines relationship marketing as a continuation of the mutual relationship
between a service provider and customer and a customer who will lead to formation of
profitability. Therefore, luxury hotels, as the service providers, can retain profitable customers
and increase their retention by planning in their marketing strategies (Kim, et al. 2004). Prio
studies confirm that service companies have received incredible benefits of customer retention
(Bagharzad et al. 2011). Mooman et al (1992) stated that customer retention was an intention
to keep a valued relationship. Yim et al. (2008) argue that customer retention is taking place
when a customer keeps on buying the market offering over a long period of time, an define it
as highly deep commitment to keep on purchasing product or service in future time regardless
of the fact that there are situational factors and marketing efforts, which have been potential to
create switching behavior. In the hotel industry it is the main job of manager and employees to
create and develop customer retention if they want to maintain their company and increase its
profitability.
Therefore hotels have various options open to them to build relationships: Hotels may
customize the relationship by an appreciation of customers' needs and the types of facilities
most suitable to them; Hotels could augment the hospitality product by building more into their
service gamut; As the relationship develops the prices offered to the customer could be reduced
to provide a more approvingly perceived price/value relationship; Hotels might attract and keep
high quality personnel: it is these people, after all, with whom guests come into contact (Gilpin,
1996).
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Theoretical literature review
The theories social exchange, transaction cost, and relational contracting, resource dependence
and resource based view have contributed to the development of relationship marketing in the
different disciplines but Resource Based View (RBV) is more suitable for this study because
the study is on the internal capability to the firm performance and gaining the competitive
advantage which could be explained clearly by RBV. Firms are viewed in terms of their bundle
of tangible and intangible resources being the source of their success, rather than the product
market combinations chosen for their deployment (Barney, 1991, 2001). The heterogeneity of
the firm-specific factors provides firms with unique capabilities, which lead to their different
profitability levels. According to this view, the firm's management has freedom to determine
its own strategies, thereby reducing the impact of the competitive environment. The
environment is seen more as a result of the strategic choices that companies make within an
industry. Resources may have a number of different functions, which may enable firms to
employ them in a number of different markets over time.
Thus different firms possess different resources and capabilities, and some of these resources
and capabilities are firm specific or costly to copy. In line with this, RBV argues that
differences in firm performance are primarily the result of the resources heterogeneity of the
firms (Wirnerfelt, 1984; Barney & Hesterely, 2010). This implies that the different levels of
resources and capabilities in firms can explain the variation in their performance. In other
words, resources differ in their impact on the firm's ability to attain success. The identified
capability provided a basic for conceptualization of the study variables and for developing the
relevant hypothetical propositions. Specifically the study proposed that relationship marketing
(core service, s/augmentation, r/customization, r/pricing and internal marketing) is valuable for
attaining customer retention. Subsequently, the analysis and inference were used to give
empirical and theoretical approval or disapproval of the findings vis-a-vis the study objectives.
Relationship marketing and customer retention
Relationship marketing is a core strategy used by firms to establish, maintain and enhance
profitable relationships with clients, while ensuring benefits for both the firm and its clients
(Grönroos, 1994). Sin et al. (2005) define relationship marketing as the activities implemented
by hotel in order to attract, interact with, and retain more profitable clients. Customer retention
refers to a firm’s ‘zero defections’ of profitable consumers or no switches from profitable
consumers to competitors (Reichheld 1996). Payne (2000a) define customer retention as the
longevity of a consumer’s relationship with a firm. Based on the literature, the variables that
can possibly influence hotels’ relationship marketing and customer retention include core
service, s/augmentation, r/customization, r/pricing and internal marketing (Berry, 2002, Gilpin,
1996).
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Core service
Core service refers to a service targeting central market needs that a company put more
emphasis on for attracting new customers and strengthening the bond with current customers,
this service offers quality, alternatives for the customers to choose between and can be
developed over time (Berry & Thompson, 1982; Berry, 2002). The core service is the most
basic level of a service – what the buyer is actually buying (Kotler et al. 2010). Success of a
service provider depends on the high quality relationship with customers who determine
customer satisfaction and retention (Jones, 2002; Lymperopoulos et al. 2006). Research has
shown repeatedly that core service influences organizational outcome such as performance
superiority, increasing sales profit and market share, improving customer relations, enhance
corporate image and promote customer retention ((Venkateswarluet al. (2015),. Furthermore,
core service and customer satisfaction were found to be related to customer retention through
repurchase intentions (Levesque & Mc. Dougall, 1996; Caruana, 2002). Core service offered
to customers is important for success and survival in today’s competitive hotel industry. Factors
for core service to consider in hotel includes knowledgeable front desk staff, security and safety
procedures, handling the customer complaints, perform guest service right. Thus, it is
hypothesized that:
H1: Core service has positive effect on customer retention.
Service Augmentation
Service augmentation is a strategy which is conducted by complementing an existing service

with an extra service. Thus, differentiates the company from its competitors. The aim of
introducing an additional service, valued by customers, is to increase customer loyalty (Berry,
2002). As service augmentation provides value-adding services for customers that are not
readily available elsewhere, these kinds of bonds are an essential element for organisations
such as hotels. Berry and Parasuraman (1991) argued that these value-adding services are not
only difficult, but they are also expensive for customers to provide for themselves. In addition,
Choi, & Chu, (2001) maintain that value-adding services help customers to be more productive
and effective. Competitors find difficulty in duplicating such services because of the high costs
in transformation. Moreover, service augmentation builds feelings of ‘empowerment’ and offer
some level of psychological control within the buyer-seller relationship (Peltier & Westfall,
2000). Additionally, Jonsson and Zineldin (2003) identified a significant impact on satisfaction
by service augmentation factors in the hotel including quality of physical facilities, friendliness
of the hotel employees, , confidence of the customers to the service provider, and relationship
dependency. Similar results were reported for the impact of personalization on satisfaction.
Thus, it is assumed that:
348
H2: Service augmentation has positive effect on customer retention.
Relationship Customization
Customization means companies focus on providing services in person, it is also refers to close
contacts that organization seek to provide its customers with through service staff, and make
customer as permanent agent (Rootman et al, 2011), referred to customization widely explored
in the literature. Stone (1954) initially suggested that customization is very important in
recognizing the existence of shoppers who evaluate personal contact in stores, because they do
not like to be served in a uniform way. In relationship marketing, and from the business to
business literature, customization is very important as it identify good personal relations Pembi
(2014). Also, in the business-to-consumer markets, this mode of thinking has been adopted by
subsequent studies (Bolton et al. 2003; De Wulf et al. 2001)identified factors for customization
in the hotel as; sympathetic, good check in system, anticipate customer needs, apologize when
something goes wrong, call customer by name. Therefore, it it assumed that:
H3: Relationship customization has positive effect on customer retention.
Relationship Pricing
Price perceived value is one of the important concepts through which firms try to provide a
range of benefits within their offerings to maximize customer’s perceived value, because
people will shop with a person or company that makes them feel they are getting more value
for their money (Mwangeka et al. 2014) One of the problems that appear later is how a value
should be defined, evaluated and priced, because it reflects the sellers pricing strategy that
impacts customers’ satisfaction and their willingness to pay positively or negatively. (Rootman
et al, 2011) offered advice from management and leaders on how to successfully retain
customers and staff. He mentioned that the key to remaining competitive in any business is to
build a relationship that is resilient to price.
Moreover relationship pricing usually referred to as frequency marketing or retention

marketing, where the service provider depends on financial incentives and economic benefits,
such as price discounts, to secure customer loyalty (Berry, 1995; Berry & Parsuraman, 1991;
Bolton & Wagner, (2003). From a broader perspective, in the business-to-business context,
(Caruana, 2002), identified financial incentives as functional bonds, which are “the multiplicity
of economic, performance, or instrumental ties or linkages that serve to promote continuity in
a relationship" (p.79). These functional bonds are created through economic, strategic,
technological (knowledge or information), and instrumental (product or service related)
benefits that are derived by the parties. For example, in a hospitality context, hotel chains,
through their loyalty programs, may provide free or discounted travel services to their frequent
349
guests (Berry & Parsuraman, 2005). According to Berry (2002) factors to consider in
relationship pricing in the hotels are; low price for long term customers, offer simple methods
of payments, stable price for long term customers, lower price for repeat customers than for
new ones. Thus it assumes that:
H4: Relationship pricing has positive effect on customer retention.
Internal Marketing
Kotler and Armstrong (1991) viewed internal marketing as the building of customer orientation
among employees by training and motivating both customer-contact and support staff to work
as a team. Grönroos (1994) asserted that without active and continuous internal marketing
efforts, the interactive marketing impact on customers will deteriorate, service quality will
suffer and customer will start to defect with negative effects on profitability as a result.
Gummesson (2002); Berry, (1995) suggested that internal marketing is a strategic operation
that combines marketing and human resource management in order for first-line service
personnel to provide the best service when interacting with customer. Barnes, Fox and Morris
(2004) suggested that marketing has traditionally concentrated on external customers but in
recent years has begun to emphasize the need to understand internal customers and the
relationships with the organization and external customers. Flambard-Raud, (2005) shows the
more the employees are satisfied and maintained, the higher the satisfaction is made for
customers. By satisfying the needs of its internal customers, the organization becomes a whole
with its employees; in turn, want to satisfy the needs of the external customers. They moved
on identifying internal marketing factors in the hotels as employees; attentiveness, offer
promptly delivery of services, provide early information to new services to customers and
record details of complaints if occurs. Internal marketing, which is derived from marketing
management in the service industry, emphasizing that organizations should treat, value and
respect employees from an internal customer's perspective to attract, develop, motivate and
retain qualified employees (Pembi, 2014). Consequently the study hypothesized:
H5: Internal marketing has positive effect on customer retention.
Customer Retention
According to Payne et al. (2000) customer retention is taking place when a customer keeps on
buying the market offering over a long period of time and increased in the amount of positive
word of mouth recommendation. Storbacka et al. (1994) suggest that customer relationship
profitability is the result of improved quality in the service provided by an organization. A
satisfied customer creates a strong relationship with the service provider; this leads to
relationship durability and customer loyalty and retention. A study of hotel guests conducted
350
by Pertzer et al. (2009) supports the notion that there is indeed a positive relationship between
loyalty, repeat business (retention), and profitability. According to Egan (2001) a number of
scholars in the field of relationship marketing (Buttle, 1996; Reicheld, 1996) consider the
causal links between satisfaction, loyalty, and profitability to be rather tenuous. Customer
retention management has several components. It is important to build relationships with
customers, to manage customer to customer interactions, to reduce dissatisfaction, as well as
to try and reduce potential defections. In addition, service failures should be managed, and
hotels should put in place plans for service recovery
Conceptual framework
The goal of conceptual framework is to categorise and describe concepts relevant to the study
and map relationship among them. Such a framework would help researchers define the
concept, map the research conceptual scope systematize relations among concepts and identify
gaps in literature (Creswel,2003). The researcher in this case has conceptualize this research as
under figure. 2.1
Figure 2.1: Conceptual framework
Independent variables Dependent variable
Relationship marketing
Core service
S/augmentation
R/customization
R/pricing
351
Customer retention
Source: synthesized I/marketing from literature
-word of mouth
-re-purchase intention
Methodology
To study the influence of relationship marketing on customer retention in Tanzania luxury

hotels, the study adopted descriptive research design. This study was conducted on fifty two
luxury hotels in Tanzania as the list provided by the Ministry of natural resources and tourism
2015. Purposive sampling design was used to obtain data from the repeated customers in fifty
two luxury hotels in Dar es Salaam, Arusha, Manyara and Zanzibar as these regions have many
luxury hotels compared to the other regions and most of the registered high class
accommodations are located in these places.
Structured questionnaires with Likert scales ranging from 1 to 5 was used with 1 indicating
''strong disagree" while 5 stood for "strong agree" were used to gather data on relationship
marketing in respect to customer retention of the luxury hotels. In addition two hundred forty
three among the purposively selected and interviewed respondents were full filled the
questionnaires that were fit for analysis. Information was gathered by use of a Likert scaled
questionnaires formed at five point. Information was sorted, coded and input into the statistical
package for social sciences (SPSS) version 20. Descriptive characteristics of respondents were
summarized using tables, frequencies and graphs (Kerlinger, 1973).
To examine the hypotheses, multiple regression model was use to test the relationship between
relationship marketing constructs (core service, s/augmentation, r/customization, r/pricing and
internal marketing) on customer retention in the luxury hotels. Before using regression,
reliability and validity of indicators were tested using Chronbach's Alpha.
Content validity was used to determine the validity of the instrument by giving to marketing
experts who modify and made the necessary correction so that the instrument can measure what
is ought to measure. Reliability was tested and value of Chronbach's Alpha for relationship
marketing constructs (core service, s/augmentation, r/customization, r/pricing and internal
352
marketing) and customers retention were .742, .689, .719, .727, 682 and .782 respectively.
According to Field, (2014), Chronbach's Alpha value above .65 fit for analysis. Therefore, it
can be said that all constructs used in this model were valid and reliable for analysis.
Findings
The results of the multiple regression analysis that were used to test the five hypotheses is
presented as table 1. The regression model interpretation ability for all relationship marketing
represented in R square coefficient was 0.215, indicating that 21.5 % of changes in customer
retention level is interpreted by relationship marketing (core service, s/augmentation,
r/customization, r/pricing and internal marketing). The F-test indicated that the regression
model is statistically significant, since F calculated value is (12.991 ) and the significance level
is (sig = 0.000 ) which is smaller than the significance level approved in the research (0.05).
This means that as luxury hotels increase relationship with their customers, will lead to increase
ability to retain these customers for long period of time. The assumption of Durbin- Watson
statistic is met (2.097), as the value was suggested to be greater than 1 or less than 3 (Field,
2014). The results leads into the rejection of the hypotheses relating customer retention with
core services, relationship customization, and relationship pricing while the two hypotheses
relating customer retention with service augmentation and internal marketing are not rejected
as the significance values are below 5%.
353
Table 1: Regression results
Model Unstandardized Standardized t Sig

Coefficients Coefficients
B Std. Error Beta
(Constant) 1.850 .376 4.915 .000
CS .017 .065 .017 .264 .792
SA .153 .070 .149 2.188 .030
RC .089 .062 .095 1.438 .152
RP .046 .060 .050 .761 .447
IM .308 .062 .318 4.999 .000
F value = 12.991 (Sig. .000)
R =.464 R2 =.215
Dependent variable: CR
Conclusion
From the summary of the results it could be seen that the research hypotheses were answered
by the luxury hotels. From the result section the hotel customers used five relationship
marketing predictors (core service, service augmentation, r/customization, r/pricing and
i/marketing to answer the research questions in order to meet the objective. With regards to the
luxury hotel; service augmentation and internal marketing had significant relationships with
customer retention while core service, r/customization and r/pricing were not significantly had
impact on customer retention.
In all, the research was able to expose relationship marketing and customer retention because
there was a significant relationship between s/augmentation and r/pricing as relationship
marketing predictors and customer retention, this could mean that, relationship between
354
relationship marketing and customer retention depends on service augmentation and
i/marketing Thus, the relationship marketing constitutes service augmentation and internal
marketing in Tanzania luxury hotels. Customers in the luxury hotels might be retained because
of reasons other than core service, customization and pricing.
Recommendation
The researcher recommend that the relationship marketing (core service, s/augmentation,
r/customization, r/pricing and internal marketing) should be boosted. Issues like responding to
customers complaints, appreciating customers, apology for poor services, hire quality staff,
implement security and safety procedures, acquire high quality equipments, implement good
check-in- system, offer simple methods of payment, offer stable price for long term customers,
offer low price for repeat customers, staff training should be the hotel's priorities. This would
be more beneficial to the hotel managers as it cost more to acquire new customers than to retain
existing ones.
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Masculinity, Symbolism and Ethnic Marketing in the UK:
Setting a Research Agenda
Ayantunji Gbadamosi
School of Business and Law, University of East London, UK
A.Gbadamosi@uel.ac.uk
Abstract
Generally, consumption constitutes a huge part of our day-to-day activities and a source of
symbolic meaning for creating and maintaining identities, which are wide-ranging in nature.
Meanwhile, one of the ways by which this is examined is through gendered segmentation which
has been considered very valuable in the marketing sphere. This provides a theoretical template
for the discourse of dynamics of masculinity in consumption. Nevertheless, a pensive literature
search indicates insufficient scholarship in this academic terrain in relation to ethnic minority
consumer groups in the UK context. Hence, drawing from the extant literature, this paper
unpacks this phenomenon and develops research agenda for exploring masculinity among this
taken-for-granted market segment in relation to high involvement products. Apart from
pinpointing the avenue for future research on this important marketing domain, the paper also
highlights the theoretical and managerial benefits of addressing the lacuna.
Introduction
The discourse around consumer identity and gendered division in consumption is gaining
striking relevance in the marketing literature. It has become a powerful force in the postmodern
era (Avery, 2012). The association of gender narrative to brand is an interesting layer of this
discussion and as shown by Avery (2012), this is so striking that even when a brand is
associated with a sex type, it may often be difficult to link it to the opposite sex. Hence, gender
still has considerable influence on people’s brand choice (Avery, 2012). Its link to market
segmentation strategy is evident in the prevailing product and services designs, as boys and
girls are conscious of this even at the early stage of life (Pennel, 1994; Schroeder and Zwick,
2010). Using gendered segmentation strategy is favoured in marketing as the segments are
substantial, easily identifiable, and accessible (Darley and Smith, 1995; Azar 2013). This
provides the theoretical justification for research endeavour in masculinity in consumption.
Meanwhile, Rogers (2007) laments that inadequate attention is paid to male gendering.
Although this relates to the African-American context of the study, a meticulous literature
search suggests that this dearth of study is reasonably pronounced even in the wider context.
As evidence shows that consumers’ identities could be dynamic, and what an individual
esteems may be rejected by another (Jones, 2007), it becomes very imperative to explore the
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notion of masculinity in consumption from the lens of ethnicity towards updating the literature.
Besides, it is argued that masculinity is a highly consumable commodity globally with
considerable nationalist symbols. Hence, studies that position the topic into cultural contexts
will be greatly beneficial and extend the current understanding on this increasingly popular
marketing subject. Accordingly, this paper, which is an eclectic literature review, exposes the
gap and sets research agenda for exploring this hugely important research area.
This paper is organised as follows. The next section provides a synthesis of the extant
perspectives in the literature on masculinity and symbolism within which various types of
masculinity is also critically examined. This is followed by the section on consumer
involvement and ethnic marketing. The paper ends with the discussion and conclusion section.
Masculinity and Consumer Behaviour: An overview
Drawing from a body of literature (see for example, Dobscha, 1993; McDonagh and Prothero,
1997; Ruether, 2001), Littlefield (2010) highlights ecofeminism, a feminism philosophy, as a
paradigm which focuses on the view that, historically, men have their dominion over women
and the natural world for the creation of the patriarchal societies. This explains the contention
of Schroeder and Zwick (2010: 23) that, semantically, masculinity is irreversibly associated
with, opposed to, and in relation to femininity. Evidence shows masculinity’s long record of
being a source of popular consumption for marketing communication audiences and profit for
cultural producers in the global marketplace (Balajia and Hughsond, 2014). It is one of the
most easily transferable phenomena across global contexts for cultural producers (Balajia and
Hughsond, 2014). From a broad perspective, Belk et al. (1982) shows that one of the most
culturally universal consumer behaviour issues is the tendency for people to make inferences
about others based on their choices of consumption objects. So, ‘to what extent does the
consumption pattern of ethnic men in the UK evidently reflect their gender narrative?’ is a
question which deserves a comprehensive research attention. Reischer and Koo (2004) raised
the question of ‘what makes a woman a woman?’ Logically and in the context of the focus of
this current paper, the question could also be twisted on the flipside to ponder on ‘what makes
a man a man?’ These authors observed the complexity that surrounds the academic response
to this simple question in the literature. For example, they cite the contention of Butler (1990)
that gender is a cultural construction and the body, in their term a ‘variable boundary’ which
perform the cultural meaning of gender. In their study on performing identity in which they
consider gender expressions within the Whitby Goth festival context and with reference to
Foucault (1985), Goulding and Saren (2009) conclude that gender identity is actively
determined by the individual who, as shown in the study, is engaged in the construction of
gender by putting bits and pieces from different gender types. Overall, their conclusion is that
these gender performances challenge the orthodox gendered aesthetics.
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Conceptualising masculinities
In the words of Bettany et al (2010:p.16), ‘The emphasis on masculinity…can be viewed as a

positive development, indicative of the shift in gender issues, towards a more central and
mainstream position. Further, gender is to be considered as a two sided coin, as constructions
of masculinity, and what it is to be male, inevitably generate and constitute constructions of
femininity, and what it is to be female’. Meanwhile, Jones (2007) notes that in Indian context,
the best means to develop a community based masculinity would be through mass drill rather
than an individualized manly issue.
Toward providing a detailed analysis of the masculinity construct, Connell (1987; 2005) cited
in Azar (2013) present four types of masculinities as hegemonic, complicit, marginalized, and
subordinate. The hegemonic masculinity stresses the significance of power in men, and
drawing from Delphy (1998) and Mathieu (1991) Azar specifically cites the power to dominate
women as embedded within this. In this schema, although the men in complicit masculinity
category have most of the attributes of men, they still do not meet all the requirement of
hegemonic masculinity. The marginalized masculinity identifies men of ethnic minority group
in which case, the criterion of differentiation is ethnicity but according to this postulation, the
subordinate masculinity describes the gay men. Martin et al. (2006) identify what could be
termed ‘situational masculinity’ among the women in their study. This involves the women
who engaged in hyper-masculine behaviour through the use of Harley-Davidson biker
subculture. However, it is important to note that despite engaging in this Hyper-masculine
culture, the women still displayed overwhelming feminine expressions (Martin et al. 2006). In
similar pattern, Littlefield (2010), using ecofeminism as the theoretical insight into hunting,
found that the men studied in the research context exhibited different kinds of masculinities
including those that revolve around being traditional, family-oriented values, connection and
care for the environment, and mastery of technology; in contrast to the stereotypical
expectations of masculinity of being disconnected from nature, socially isolated and
dominating women and the nature. It is noteworthy that these postulations still leave us with
many unanswered questions on the marketing implications of these masculinity types for ethnic
consumers especially in the UK context in which this study is situated.
In 2005, Connell and Messerschmidt’s (2005) estimated that the concept of Hegemonic
masculinity was formulated about two decades earlier, and was first proposed within the social
inequality field of study in Australian high schools context (Kessler et al. 1982 Connell and
Messerschmidt’, 2005). It is described as the cultural ideal masculinity type, which is
practically unattainable by any man but exerts controlling effect on all men through the
ritualization of everyday social practice (Lima, 2012). As highlighted in Cox (2014), Tremonte
and Racioppi (2009) presents Daniel Craig’s James Bond as a rough and muscular spy, Cox
(2014) argues that if critically examined, the character is insecure and incomplete. This critical
363
stance seems to lay credence to the claim of Lima (2012) that the hegemonic masculinity is
practically unachievable. Similarly Rhodes and Pullen (2012), while referring to Australian
Masculinity, argue that ozRock depicts masculinity as though present, it is being disrupted by
the feminine. According to Connell and Messerschmidt (2005: 841), ‘Hegemonic masculinity
has multiple meanings…Men can dodge among multiple meanings according to their
interactional needs, Men can adopt hegemonic masculinity when it is desirable, but the same
men can distance themselves strategically from it at other moments. Consequently,
“masculinity” represents not a certain type of man, but, rather, a way that men position
themselves through discursive practices”. It is not surprising that it is established in a rich body
of literature that masculinity is not a monolithic block (see for example, Lima 2012; Littlefield,
2010)
Furthermore, Averi (2012) raised the example of how Volkswagen used its 2012 relaunch of
its Beatle to bring men into the female-skewed market with the claim caption of ‘it’s a boy’.
Similarly, Lida (2005) writes about the feminization of masculinity and notes the fact that
fashionable maleness has been an issue of discussion for some time. He explores the
significance of the act of young men employing feminine’s aesthetics for practicing new
masculine identities. Averi (2012) notes that since most of people with money and power are
men, it is viewed as rational that women are crossing into women’s terrain in the form of
wearing clothes associated with masculine. Conversely, crossing into women’s feminine
domain by wearing clothes associated with feminism is considered irrational, against male
dominated culture and downward mobility (Averi, 2012). This opens up the question of ‘how
do we contextualise these complexities into ethnic minority marketing in the UK?’ In his study
on defining the makers of masculinity, he found that men in the study continually cherish and
protect the masculine identity meanings of their brands. Hence, despite the complexity, it seems
logical that masculinity has its place in marketing of a number of products and services.
Examples of this relevance and application abound. These include Formula 1 sport (Sturn,
2011) and Harley-Davidson (Martin et al. 2006). Sturn (2011) notes the potential ‘fantasy’ of
a male fan identifying with another male sport star. No wonder, it is argued that cultural
messages within advertising discourse still function to revolve around the traditional gender
roles, hence takes cognisance of masculinity and femininity constructs (Schroeder and Zwick,
2010).
Consistent with the marketing application of the masculinity construct, Azar (2013) identify
four types of masculinity as hegemonic, subaltern, chivalrous, and emerging. This is based on
the result of his study which shows that brand masculinity is a bi-dimensional construct which
comprise of “Male chauvinism” and “Heroic” dimensions. Hegemonic masculinity brands are
categorised as such as they scored lower than the overall sample mean on heroism dimension
but higher than the overall sample mean on male chauvinism, whereas the emerging
masculinity brands are those that scored higher on both dimensions than the overall sample
364
mean for each of the two dimensions. According to Azar (2013), while the brands categorised
as chivalrous masculinity scored higher than the sample mean on heroism dimension, they
scored lower than the sample’s mean on male chauvinism. The last category describe those
brands identified as Subaltern masculinity that scored lower than the mean on both the Male
Chauvinism and Heroism dimensions. Overall, there is evidence of marketing application to
the construct of masculinity in terms of peoples’ product decisions. However, how this play
out specifically in the context of ethnic consumers especially Black African men in the UK
remains a palpable lacuna in the extant literature.
Symbolic Consumption
In its widest sense, consumption is key to meaning practice of our day-to-day living and it is a
significant source of symbolic meanings with which we, as consumers implement and sustain
our project of self (Wattanasuwan, 2005). Extant studies suggest that consumption symbolism
recognition permeates various societies and age groups (Nairn, et al. 2008; Posel, 2010) and
interestingly indicate that children use brand symbols which play significant role in their social-
cultural lives (Nairn et al. 2008). Evidence suggests that children as young as five could form
consumption constellation, which could be defined as a group of complementary products,
brands or consumption activities that could be used for constructing, signifying, or performing
a social role (Englis and Solomon, 1996; Chaplin and Lowrey, 2010). Meanwhile while
evidence suggests that consumption stereotyping decreases in adulthood, the ability to
recognise consumption symbolism is still noticeable at that stage of life (Belk et al. 1982).
While symbolic consumption among ethic consumer in the UK context has been examined
previously (Gbadamosi, 2015), this is yet to be specifically linked to masculinity which
necessitates research action for extending the current understanding on this topic. In a different
context, the work of Wong (2007: 472) encapsulates the “complex and compounding
relationship that thrives between the identities of Islamic communities, the state and the global
forces of consumerism and market forces”. Essentially, the study elucidates a number of ways
by which consumption shapes and is shaped by a communal religious ethos and shows that it
plays a key role in not only attracting them to the community but also socialise them to the
ethos of this community, and shaping consumption practices and brand relationship of
members. This further emphasises a need for an understanding of different cultural contexts.
Notably, Cody and Lawlor (2011) also explore the theory of liminal consumption to reflect the
lived experience of existing midway within the transition between the two worlds of child and
teen. According to them, this state is associated with experiencing a suspension of identities
during which commitment to the definable social categories of either states cannot be made. In
their study, the consumption pattern of these individuals was found to be dialectic of concurrent
light and shade, obscurity and regeneration. So, by and large we seek symbolic resources to
help us negotiate, interpret and even appropriate meaningfulness in our day-to-day
consumption activities (Wattanasuwan, 2005).
365
Jones (2007) shows the wide-ranging nature of identities in that they cover various issues
including eating practices like the quantities and types of food consumed; personal
characteristics such as life style and body image; reference group activities and other various
social involvements. From the national standpoint, the contribution of advertising to the
nation’s sense of self has been noted (Bulmer and Buchannan-Oliver, 2014). So, people do not
only see consumption as an extension of who they are but actively express themselves through
it (Secord, 1968; Belk, et al. 1982). Closely linked to this, it is found that people who are
actively involved in parting with old self-identity and forming a new one may result to using
joint consumption to develop relationships with the new world central to the construction of
the new self, desired (Gainer, 1995). Considering this within the consumption of entertainment
offerings, Neale (2010) shows that, consumers within this context exhibit uncommon loyalty
level towards the sources or producers of these offering such as their favourite actors and
musicians. Drawing from the literature (Hofman, 2000; Redden and Steiner, 2000; Kozinets,
2001; Muniz and O’Guinn, 2001), he highlights key differences between fans and mere
consumers and shows that fans are not only heavy users of the products in terms of purchase
pattern and usage, they also tend to be members of the brand communities, engage in strong
positive word-of-mouth, and consequently positively influence the firm’s profitability. This, to
a great extent is symptomatic of symbolism within this consumption terrain.
Logically, a link between symbolic consumption and ritual could be made. Gainer (1995)
explains ritual as diverse range of human behaviour that covers a continuum ranging from
intensely personal to extremely elaborate and public. This view is corroborated by the
standpoint which sees it as involving scripted behaviour, the use of artefacts, intense
atmosphere and symbolic meaning of actions (Rook, 1985 cited in Gainer, 1995). Neale’s
(2010) study on loyalty and ritualistic consumption of entertainment shows example of suitable
rituals at a sporting event such as professional football to include: making a sign or banner,
painting or decorating the body, wearing a team’s colour, uniform, or lucky charm, socialising
before and after the event, purchasing the team’s merchandise, and singing the team’s
song/national anthem with other members of the audience at the event. The display of
symbolism and conspicuousness in the formula one leisure practice is explained by Sturm
(2011) as showing how prestige and authority are ascribed to some fans that produce and
display authentic driver logos, and achieve strategic status within the community. Nonetheless,
the extent to which these relate to masculinity and ethnic consumption is yet to be explored. It
is interesting to note that symbolism is also identified in the aesthetic products (Charters, 2006).
With reference to Blackburn (1994:8), Charters (2006) defines aesthetic as “the study of
feelings, concepts, and judgements arising from our appreciation of the arts or of the wider
class of objects considered moving, or beautiful, or sublime”. But it is worth noting that these
symbolic consumption activities do not happen without a price. The seeming freedom to choose,
ironically leads us to enslavement as new desires for market offerings reduces one’s liberties
366
(Wattanasuwan, 2005). It is also argued that this symbolic, self-expressivist communicative
form of identity could over individualize consumption (Shankar et al. 2009). Findings show
that much as people could try, not all identities are readily or equally available to all, and some
identities and their associated symbolic meanings will be difficult to negotiate (Shankar et al.
2009). This supports similar claim made for hegemonic masculinity and strengthens the
justification for focussing on this as subject of research enquiry.
Consumer involvement: Background information
There seems to be an agreement in the extant marketing literature (for example,

Kassarjian,1981; Greenwald and Leavitt, 1984; McWilliam, 1997; Gbadamosi, 2009) that the
concept of involvement was first popularized in marketing through the context of advertising
by Krugman (1965). Krugman (1965: p.355) contend that ‘by [involvement] we do not mean
attention, interest, or excitement but the number of conscious “bridging experiences”
connections, or personal references per minute that the viewer makes between his own life and
the stimulus’. Subsequently, it has been defined variously. Nonetheless, one of these definitions
with far-reaching meaning sees consumer involvement as perceived personal importance and
/or the interest consumers attach to the acquisition, consumption, and disposition of a good, a
service, or an idea (Celsi and Olson, 1988; Mowen and Minor, 1998).
Irrespective of the goal object in question, the involvement that consumers have for such things
varies in level. One perspective argues that involvement is multi-level in nature implying that
it is to be a continuum rather than a dichotomous issue of high and low levels (William et al.
1978; Traylor, 1983; Greenwald and Leavitt, 1984; Sheth et al. 1999). Clearly, there is merit
in this contention but Rothschild (1984: p.216) contends that it is almost impossible to study
involvement in an experimental design, if it is conceptualised as an independent variable; hence
the dichotomy is most favoured. Emphatically, the most commonly held view is that
involvement can be categorised into low and high levels. In this reasoning, at low level of
involvement, the consumers are often indifferent, and may not even recognise their needs and
wants prior to embarking on shopping trip (Hsu and Lee, 2003). For instance, it is argued that,
for low-involvement product categories, similarities of attributes between competing brands
lead to variety-seeking behaviour (Bolfing, 1998) which is symptomatic of minimal or no
commitment.
Meanwhile, in situations of high involvement, consumers behave as information processing,

problem solving, and cognitive individuals reaching for a reasoned decision for some
categories of goods and services (Kassarjian, 1981). In line with this claim, in a study on the
effects of mood, involvement, and quality of store experience on shopping intention,
Swinyard’s (1993) findings show that highly involved consumers are more active processors
of information cues. Although with specific focus on mass media, this active processing of
367
information is further supported by Krugman (1965: p.355) who argues that ‘with high
involvement, one would look for the classic, more dramatic, and more familiar conflict of ideas
at the level of conscious opinion and attitudes that precede changes in overt behaviour’. Given
the profundity of activities involved in this level of involvement, one could state that a high
level of involvement equates (approximately) to personal relevance or importance (Greenwald
and Leavitt, 1984).
High-Involvement Products
Some caution is needed in attempting to define a ‘high-involvement product’. This is especially

necessary as it is argued that the same product could be low involving for some and high
involving for others (Sheth et al. 1999). Besides, Involvement does not only vary by product,
but also by brand, as it is certainly possible to have high-involvement brands among low-
involvement products (Robertson et al. 1984). Still, many studies have attempted to categorise
products as either low or high involvement (Ratchford, 1987; Zaichkowsky, 1987). The FCB12
grid of Vaughn (1980; 1986) and the Rossiter-Percy grid (1991) are further examples of studies
that categorise products into low and high involvement. Clarke and Belk (1974) assert that with
a relatively homogeneous population, the rank orders of involvement with an array of products
are expected to be reasonably similar. And it is argued further that, ‘consumers with similar
involvement levels should have similar motivation towards the product (Zaichkowsky and
Sood, 1988: p.32)’. Hence, it is argued that it may be possible to talk about high and low-
involvement products (McWilliam, 1997). Accordingly, high-involvement products may be
defined as products which are bought with considerable planning and the associated costs and
risks are high to the consumer.
Ethnic minority marketing: The United Kingdom Perspective
By and large, culture is a major factor in consumption issues. It becomes even more fascinating
when the discourse revolves around consumption issues vis-à-vis people that move from one
cultural settlement to another. This is because these consumers are exposed to products,
services, and other cultural issues in a new environment in the form of acculturation in various
ways (Gbadamosi, 2015a; Laroche and Jamal, 2015). So, ethnic marketing has a powerful
societal relevance, although there is a caution that discussion of ethnic marketing need not be
restricted to cross-border crossing nor should the mainstream be excluded (Lipzits, 1998;
Penaloza, 2007; Visconti, 2015). As the detail of that contention is not particularly the focus
of this paper, it is suffice to simply state that ethnic marketing is a fertile research area and
continues to attract considerable research attention these days, especially in the United
12
FCB is an acronym for Foote, Cone and Belding which is the advertising agency that commissioned the grid.
368
Kingdom context (Nwankwo and Lindridge, 1998; Gbadamosi, 2015a, b, Ojo et al. 2015).
While some of these growing literature postulations relate to entrepreneurship as a broad area
(Ram et al. 2002; Davidson et al. 2010; Nwankwo and Gbadamosi, 2013), others relate to
consumption issues within this context (Jamal, et al. 2015; Gbadamosi, 2012). Evidently, the
dominant argument in the extant relevant literature is about the key role of culture in these
value-oriented transactions of these ethic consumers. Consequently, the lack of homogeneity
due to cultural and other factors, makes the case to support the claim of Nwankwo and
Lindridge (1998) that “one size fits all” strategy might not be right for capturing all the
peculiarities of the ethnic minority market in Britain. However, it is noteworthy that existing
studies (based on a meticulous search of available information) have not devoted attention into
synthesizing masculinity, symbolic consumption and consumer involvement in the context of
Black African consumers in the country. The sheer volume of extant research related to this
topic are either US-based or within different theoretical foci. For example, White et al. (2013)
show differences in the cigarette consumption between Black and White men. They state that
‘assuming White masculinity as the norm against which African American masculinity could
and should be measured…African American men had a history of “striving” for access to the
social and economic symbols of [White] masculinity and power…The striving, however, has
been frustrated by racism and poverty. Tempered by the realization that he would never be
‘The MAN’ but was forever doomed to be the “boy”, the lexicon of black masculinity’ (White
et al. 2013: pe6). Another study conducted by Wolf et. al. (2008) revolves around the
consumption of fruit and vegetable by urban and mostly immigrant black men in the United
States and shows the low-intake of these products among the respondents. Viljoen (2012) also
approached the discussion of African masculinity from the perspective of glossy men’s
magazines and how these men that constitute the niche use it for identity narratives. A related
study by Okech and Harrington (2002) found positive significant relationship between Black
consciousness and self-esteem, and Black consciousness and academic self-efficacy. In this
study, they define Black consciousness as a person’s beliefs or attitudes about his or her self,
own race, and the White majority in relation to the Black experience (p.214). By and large,
while one can make inferences from these postulations and findings in respect of Black African
men, they are not specifically related to the UK and high involvement products contexts. This
strengthens the case for the research agenda presented in this paper. Hence, filling this palpable
lacuna will update the literature and provide strategic directions on the pattern for the use of
marketing strategy in respect of the context of this study. Addressing this is compelling towards
advancing knowledge in this research area.
Figure 1: Masculinity, involvement, and Symbolic consumption: Theoretical Framework for

ethnic consumers
369
Ethnic consumers Ethnic consumers
Consumer
Involvement
Purchase
Masculinity
decision
Culture
Symbolic Consumption
Ethnic consumers Ethnic consumers
Discussion and Conclusion
370
The postmodern turn in the society has been largely used by marketing to conceptualize human
subject, identities and self for the contemporary understanding of consumer behaviour
(Mccreanor et al. 2005). This explains why Belk et al. (1982) state that communicating through
consumption choices is closely linked to decoding information about consumption behaviour
of others. Meanwhile, in this postmodern era characterised with the erosion of historical forms
of identity, people use symbolic meanings of brands, leisure and lifestyle pursuits to avoid a
potential existential crisis (Elliott and Wattanasuwan, 1998). Given this as a theoretical
platform, this paper presents an eclectic literature review on the theoretical interaction of
masculinity, symbolism, and consumer involvement as shown in Figure 1. The paper uncovers
a number of future research possibilities within the remit of these theoretical jigsaw cutting
across various offerings that are high involvement in nature. It would be interesting to know
the ethnic consumers, say Black African men’s perception on market offerings such as
automobile, houses, highly valued fashion products and many others of similar features. As
shown in Figure 1, symbolic consumption, consumer involvement and masculinity are linked
by the consumer’s culture in terms of value-oriented marketing decisions, it would be
theoretically beneficial to know the extent of the influence of culture on these ethnic men
consumers. For example, as hegemonic masculinity is described as not monolithic, ‘variable’,
and unattainable (Littlefield, 2010; Lima, 2012), one will keep wondering, ‘would this be
applicable to Black African men in the UK context? Besides, it will also be interesting to gauge
the impact of consumer age on the link between these marketing phenomena. How would
young ethnic men behave in regards high involvement products when compared to their older
consumers in the UK Context? It will also be theoretically beneficial to explore whether there
will be differences in the behaviour of low-income and those at the upper level of the income
spectrum regarding symbolism and high involvement products. In conclusion, there is a clear
research agenda to address regarding these issues with huge potential for robust theoretical and
managerial implications in the marketing field if actualized.
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The Process of Firm Establishment In International Markets: A European
Telecommunications Operator in Latin America
Desalegn Abraha
School of Technology and Society, University of Skövde, Skövde, Sweden
desalegn.abraha@his.se
Syeda-Masooda Mukhtar
Faculty of Economics and Business Administration, King AbdulAziz University, Jeddah,
Saudi Arabia. s_m_mukhtar@yahoo.com
Abstract
Our understanding of the process of firm establishment of foregin firms within the developing
and emerging countries remains limited, while the market-specific context-driven nature of the
firm establishment process has been largely overlooked in the literature. We aim to address
these omissions and explore the establishment process of a Spanish multinational
telecommunication firm, Telefónica, in Brazil and Chile applying the "Four Stages Firm
Establishment Process Model" by Abraha (1994). We identify strategic responses crafted by
Telefónica to overcome competitive challenges during its establishment process. We revise
Abraha's model in view of the findings and conclude with implications for managerial practices
and future research.
Key Words
Internationalization; Firm Establishment; Telefonica; Brazil; Chile
Introduction
The motives for firms to internationalize vary in pursuit of growth and value creation through
greater market power (Kogut, 1985); harnessing economies of scale and scope (Caves, 1996);
reduction in input costs (Dunning,1988); experiential learning (Barkema and Vermeulen, 1998;
Ghoshal and Bartlett, 1990); and exploiting host-country-specific advantages such as taking
advantages of low production cost, skillful workforces, and getting close to raw material
sources (Hill and Jones, 1998, Dunning, 1993; and Ferdows, 1989). Just as firms' motives to
internationalize vary, so do the theoretical perspectives articulating their internationalization
process and establishment in foreign markets. Borrowing from Andersson's (2000) terminology,
the dominant theoretical perspectives can be divided into the economic approach, and the
376
behavioral approach. Essentially, the economic approach assumes premeditated decisions on
part of firms in pursuit of most profitable locations and includes the international product life
cycle theory (Vernon, 1966); transaction cost theory (Coase 1937; Williamson, 1975);
internationalization theory (Buckley and Casson 1976); the eclectic paradigm (Dunning, 1980,
1988); and the institutional theory (Boisot and Meyer, 2008). While, the behavioral approach
stipulates that the speed and direction of internationalization is dictated by international
experience of the firm and includes the Ahroni's decision-making model (Aharoni, 1966); the
Uppsala process model of experiential learning (Johanson and Wiedersheim-Paul, 1975;
Johanson and Vahlne, 1977); the Network theory and network inter-dependency (Johanson and
Mattson, 1988); international new venture and entrepreneurial learning (Oviatt and McDougal,
1994, 2005; Knight and Cavusgil, 1996).
Notably, the two major rival theories that have dominated the discipline are the Uppsala model
stipulating gradual engagement in international markets through experiential learning, and the
transactions cost theory according to which circumstances compel firms to absorb and
internalize international transactions under its own organizational hierarchy. Detailed analyses
of these and other perspectives are well documented in the literature (e.g., Al Qur'an 2014;
Gelbuda et al. 2015). The thesis central to all perspectives is that an understanding of the
'process' of internationalization' is critical to the successful establishment of firms in distant
foreign markets, and to their subsequent performance and success. However, not all markets
are created equal from the firm establishment perspective. Abraha and Mukhtar (2002), for
example, differentiate between the relatively 'structured-developed markets' of the developed
economies, and the 'loosely-structured markets' and the 'less-developed markets' of the
emerging and developing economies. Their thesis rests on the premise that the process of firm
establishment is market-specific and context-driven, and that in order to better understand the
process of internationalization, the theoretical perspectives must take into account the
contextual elements embedded in the host country's culture, business practices, institutions,
market structure and historical background. Surprisingly, however, these aspects are vastly
underrepresented in the literature in general, and in relation to the Latin American markets in
particular. To address these omissions, we set out to explore how the Latin American
environment shapes the establishment process of foreign firms and pose the following research
questions.
Research Question 1: What are the challenges faced by foreign firms during the establishment
process within the loosely-structured Latin American markets?
Research Question 2: What are the strategies crafted by foreign firms to overcome challenges
and to achieve success during the establishment process within the loosely-structured Latin
American markets?
377
We begin with defining a conceptual model for firm establishment in foreign distant loosely-
structured markets to serve as our framework of analysis.
The Conceptual Framework
We adapt the "Four Stage Firm Establishment Process Model" developed by Abraha in 1994
(Figure 1) as part of his doctoral dissertation to study Swedish firms in Kenya. This model
explicitly differentiates the market-specific context-driven nature of firm internationalization
and has been applied in relation to several loosly-structured and less-developed markets (e.g.,
Abraha and Hyder 1997, 2000; Abraha and Mukhtar 2002; Abraha et. al 2008; Abraha, 2010,
2012).
Figure 1: The Four Stages Firm Establishment Process Model in Foreign Markets
(Source: Abraha 1994)
Stage 1: The historical development captures the role of the' actors' involved in initiating the
establishment process in the target foreign market, as well as influencing its course of direction
and resource allocation which, in turn, influences the judgement on part of the establishing firm
whether there exists a potential network in the target foreign market that it can tap into.
Stage 2: The focal relationship refers to the main 'focal customer' to which most of the
establishing firm's activities and resources are directed. This stage of the model assesses the
initiation and the development of the focal relationship, as well as the stability and strength of
the relationship in terms of the contribution and exchange of resources, and the bond that
develops as a result of these exchanges. Notably, when the establishing firm operates through
an agent, the focal relationship is between the parent establishing firm and the main customer,
but if a subsidiary is established in a foreign market, the focal relationship is between the
subsidiary of the parent firm and the main customer. The focal relationship is influenced by,
and also influences in turn, Stage 1 (Figure 1).
378
Stage 3: The supporting relationships refer to relationships that facilitate the focal relationship
to function. In other words, for an establishing firm to manage its focal relationship (Stage 2),
the firm necessarily needs to cultivate the supporting relationships.
Stage 4: The general environment refers to the macro-environment within which the process
of establishment takes place and considers factors such as the availability of qualified
manpower; language; financial institutions; government regulations; politics; infrastructure;
and culture. The general environment influences the actors, as well as the activities and the
exchange of resources. It thus impacts stages 1, 2 and 3 of the establishment process and,
conversely, is impacted by factors that contribute to these three stages (Figure 1).
Notably, Abraha's 1994 model (Figure 1) concurs with the network theory and network
interdependency logic of Johanson and Mattson (1988) who posit that industrial networks
consist of actors engaged in distribution, production and the use and consumption of goods and
services, and that these actors together constitute a network of relationships. Abraha (1994)
also concurs with Johanson and Vahlne (2009) revised Uppsala Model acknowleding that
"markets are networks of relationships in which firms are linked to each other in various,
complex and, to a considerable extent, invisible patterns" (Johanson and Vahlne 2009, p.1411).
Notably, Dunning also revised his earlier 1997 model to include the newtwork relationships
(Dunning and Lundan, 2008). Essentially, the network approach theorizes that the
establishment process equates to collaboration (and interdependency) with other firms
operating within the same market in which the entering firm exchanges its resources (e.g.,
Becerra and Houtzager, 2012; Ghauri and Holstius, 1996; Johanson et. al. 1994; Håkansson,
1989; Håkansson and Snehota, 1995). Further, Johanson et al. (1994) advocate that the
establishment process involves cultivating relationships that are new to the establishing firm
and to the actors with which it interacts in the new market, where the establishing firm either
creates additional relationships on top of the already developed relationships, or it interrupts
existing relationships and develops new ones. The network approach thus emphasizes the (1)
identification of the crucial events, opportunities and constraints, and (2) crafting appropriate
mechanisms to utilize and harness potential benefits that accrue from the identified events and
opportunities.
Research Methodology
We scanned the Latin American markets over the past thirty years. The telecommunication
sector stood out exhibiting an accelerated establishment of new transoceanic and
transcontinental network of European telecommunications companies following sweeping
privatization reforms (Solana, 2012). According to Mariscal and Kuhlmann (2009), these
reforms came in 'three waves'. The first wave began in Chile in 1982; the second in early 1990s
in Argentina, Mexico and Venezuela, and the third in the mid 1990s in Brazil, Bolivia,
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Nicaragua, Colombia and Peru. Given these developments, we determined the European
telecommunication firms which had entered Latin America during this period as our research
cases to ensure that sufficient time had elapsed to enable the study of all four stages of the
establishment process depicted in Figure 1. We opted for a qualitative case study approach on
bases that (1) the subject under study is complex involving intra-organizational relationships
across national boundaries likely to be marked by social, political, and cultural differences
between the establishing firm and the distant foreign market; (2) unique contents of the case
can be studied permitting a complete analysis of the observed issue (Saunders et al. 2012); and
(3) a detailed and intensive analysis can be generated to develop as full an understanding of the
selected cases as possible (Silverman, 2010).
Given the geographical location of the researchers, it was decided that it would be easier to
gain access to senior executives if the parent establishing firm was based in Spain. Based on
these criteria we identified Telefónica, a Spanish telecommunication firm ranked eighth in
terms of market capitalisation; first as an European integrated operator; and twentieth in the
Eurostoxx 50 with 77% of its operations in Spanish and Portuguese speaking markets
comprising 221m customers. Once we learned that Telefónica operated in a number of Latin
American countries, we decided to study more than one Latin American country on grounds
that a holistic multiple case design using multiple sources of evidence helps in "the
development of converging lines of inquiry, a process of triangulation and corroboration” (Yin
2003, p.22). Based on our criteria and in consultation with the senior executives from
Telefónica S.A (Spain), we identified the Chilean and the Brazilian markets where the firm had
entered in 1989 and 1998 respectively. The findings in terms of the 'Four Stage Firm
Establishment Model' (Figure 1) are as follows.
Findings
The Establishment of Telefónica in Chile
Stage 1: The Historical Development: Historically, the Chilean telecommunication sector had
been dominated by two public companies, Compañía de Teléfonos de Chile (CTC) and Entel.
In 1987, the Production Development Corporation (CORFO) initiated the privatization of the
CTC with an IPO which provided the opportunity for Telefónica S.A (Spain) to enter the
Chilean market through a purchase of 10% ownership in CTC which later become wholly
owned by Telefónica as Telefónica CTC Chile. Notably, Chile was the first country in Latin
America in which Telefónica began to operate in 1989 and set up its subsidiary Telefónica
Internacional Chile S.A. In 1996, a local telecom company, VTR, and Telefónica CTC Chile
joined together creating Startel which had a nationwide coverage. In 1997, CTC bought out
VTR and renamed the firm Telefónica Móviles, now a market leader operating under the brand
name Movistar since 2009.
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Stage 2: The Focal Relationship: Telefónica S.A. (Spain) implemented a muti-step approach
to establish itself through its focal relationships which began with a 10% shareholding in CTC,
Telefónica supplier in Chile, followed by the acquisition of CTC. Telefónica also acquired
another local company, VTR, which was initially Telefónica focal customer in Chile. These
relationships facilitated the firm's establishment process. CTC relationship aided lenient
payment arrangements and technological support; and VTR relationship aided improving the
quality of Telefónica service. Notably, Telefónica acquired the already established customer
base of both.
Stage 3: The Supporting Relationships: Telefónica benefited from several 'supporting

relationships' during its establishment process. A number of high level summits headed by the
King of Spain and the Spanish government were promoting Spanish firms as investors in Latin
America at the time. While these initiatives had a positive impact on Telefónica efforts to enter
Chile, the nationalist policies during the dictatorship of president Pinochet favouring local
companies in detriment to foreign investments created some obstacles. The ultimate strategy
adopted by Telefónica rested on support received from SUBTEL, the Chilean Regulatory
Agency of the Ministry of Transport and Telecommunication, as part of the privatization
process. Notably, while SUBTEL supported Telefónica in its bid for acquiring shares in CTC,
the greatest controls faced by the firm during the initial stages of establishment were also posed
by SUBTEL. Telefónica had to find ways to manage what we term the SUBTEL 'controlling
relationship', since SUBTEL as the regulatory agency was responsible for setting regulation,
ensuring compliance, granting requests for concessions and fixing call rates with which
Telefónica had to comply.
Stage 4: The General Environment: Telefónica establishment process was impacted by the
political and legislative transition from dictatorship to democracy in Chile, as well as the
country's legal system and environmental legislation. The former constrained the firm's
arbitrary administrative decisions as Telefónica had to get government's consent to "resolve
the various hurdles" prior to its entry, while the latter required the firm to reduce the
environmental impact of its infrastructure system through better energy efficiency. Both
impacted the firm's operations negatively in the early stages of establishment. In addition, the
establishment process was marked by stiff local competition: VTR was a strong competitor in
broadband, TV and telephony; DirecTV competed in the TV segment; Telsur dominated
southern Chile in broadband, TV and telephony; Claro dominated fixed service in a JV with
Telmex brand; Entel was leader in the mobile segment; as well as more recent entrants Nextel,
Virgin Mobile and Falabella Mobile. Despite strong competition, Telefónica Movistar built
itself as a market leader in mobile telephone and wireline broadband. The competitive
advantage of Telefónica Movistar was said to be its integrated and convenient package offers
nationwide. The firm now has around 12m customers with a 38.5% market share in mobile
telephone; 40% in home broadband; 30% in mobile broadband; and 20.2% in Pay TV.
381
While cultural differences impacted the firm's operations to a lesser degree with a shared
language and similar cultural affinities which also accrued financial benefits as less had to be
spent on marketing, hurdles were faced due to political corruption and differences in corporate
and management practices. In addition, given the historic context, Telefónica investment was
perceived as an attempt to acquire quasi-dominant position by the Spanish creating mistrust.
The Establishment of Telefónica in Brazil
Stage 1: The Historical Development: Following the reforms initiated in 1991, Telefónica
entered the Brazilian market in 1998 with the privatization of Telebrás which had been
operating as a government monopoly since its creation in 1972. As part of its strategy under
the operation code name “Véronica”, Telefónica purchased the local firms, Telesp and
TeleSudeste Celular, which had operations in Sao Paulo, Santa Catarina and Rio Grande do
Sul based on the rationale that these regions were "easier" geographical locations in terms of
cultural affinity; represented high income-high demand customer base; and necessitated
relatively low investment as they were geographically "compact". In 2002, Telefónica
partnered with Portugal Telecom in a JV under the brand name Vivo. In 2010, Telefónica
acquired Portugal Telecom stake in Brasilcel and thereby expanded its operations
geographically in the Northeast. Telefónica Vivo is now a leading national Brazilian brand
reputed for its network and service quality.
Stage 2: The Focal Relationship: Telefónica S.A. (Spain) followed a multi-step strategy. In
step one, it entered the market with the acquisition of 35% common shares in Companhia
Riograndense de Telecomunicações (CRT) in which the majority shares were held by the
government, as part of a consortium with RBS Participaçòes and Telecommunications
Company of Chile (CTC) in a competitive bid against six other consortia. In step two, Telesp
was bought jointly with RBS, Brazil; Iberdrola, Portugal Telecom; and Bilbao Vizcaya Bank,
BBV. In step three, a JV was formed with Portugal Telecom operating under the brand name
Vivo. These focal relationships were pivotal to the establishment of Telefónica in Brazil which
is now the largest cellular operator in Latin America, as they enabled the firm to get access to
the local market, costs and risks were shared, and know-how of the Brazilian market was
transferred over.
Stage 3: The Supporting Relationships: Telefónica S.A. (Spain) benefited from several
'supporting relationships' including the Center for Export and Investment of Spain (ICEX); the
Chambers of Commerce; and embassies and commercial offices in both Brazil and Spain.
These actors helped to identify market segment, suppliers and focal customers, as well as
offered advice on how to deal with local customs and cultural values. ICEX with a remit to
support the internationalization of Spanish companies, was instrumental in helping Telefónica
in the acquisition of shares in CRT which enabled the firm to enter the Brazilian market.
382
Notably, Telefónica faced what we have termed the 'controlling relationships' exemplified by
its interaction with the National Telecommunications Agency (ANATEL), the regulatory
agency for the development of telecommunications in Brazil. Paradoxically, while ANATEL
had supported the establishment process on the one hand with its decision to approve the JV
between Telefónica and Portugal Telecom, it enforced strict controls and compliance with
regulations in relation to R&D investment which dampened the establishment process.
Stage 4: The General Environment: While deregulation of the telecommunication sector

facilitated Telefónica entry into Brazil, the country's political stability, legal security, strong
institutions and government transparency supported its subsequent establishment. Red tape was
the firm's main challenge in the early stages of establishment. For example, firms must comply
with twice as many regulations in Brazil than in the OECD countries. Further, just one year
after entering the market, devaluation of the Brazilian Real Coin (BRL) along with high interest
rates posed unexpected challenges which risked investment and diluted financial performance.
Poor transport and energy infrastructure, slow justice system, guarantor-based rigid labour
market posed additional hurdles. In addition, cultural and language differences turned out to be
major barriers which slowed down the establishment process and forced Telefónica to develop
new strategies such as investment in initiatives to break down cultural barriers.
Discussion
Interestingly, even though Telefónica entered Chile and Brazil 11 years apart in 1987 and 1998
respectively, not only are the historical developments in the two countries similar which opened
up growth opportunities through geographical expansion, Telefónica establishment strategy in
the two markets also follows a similar pattern (Table 1). In Chile, Telefónica cultivated focal
relationship with a local agent CTC through its subsidiary, Telefónica International Chile S.A,
to initially establish itself in the market, and later acquired CTC becoming the wholly owned
Telefónica CTC Chile, subsequently renamed Telefónica Móviles. In Brazil, Telefónica
cultivated focal relationship with a local agent CRT, followed by with Telesp and Telesudeste
Celular, initially becoming their main service distributor and later acquiring them. Through
these strategies, Telefónica took over the established customer base of the acquired companies,
as well as these companies' focal customers and their suppliers. These relationships thus helped
Telefónica to mitigate risks, share costs and reduce investment requirements.
Table 1: A Summary of the Establishment Process of Telefónica S.A. (Spain) in Chile and
Brazil
383
The Establishment Telefónica Spain S.A. Telefónica Spain S.A. (Spain)
Process (Spain) in Chile In Brazil
Stage1: Historical First wave of privatizations Third wave of privatizations in

Development of the in Latin America Latin America
Establishment Process
Entry in 1989 Entry in 1998
Trail of company Trail of company acquisitions

acquisitions and local and local partnerships:
partnerships:
CRT
Bond Corporation
Telesp-Telesudeste Celular
CTC
Portugal Telecom
Telefónica CTC Chile
Telefónica VIVO
Telefónica Móviles
Successful Strategies Motive for internationalization: To take advantage of the

growth opportunities through geographical expansión made
posible by deregualtion in the telecommunication sector
Purchase of local companies from the very outset at the time

of market entry
Stage 2: The Focal Inherit customers of Inherit customers of purchased

Relationships purchased companies in companies in distant foreign
distant foreign market market
Successful Strategies Quick adaptation to the foreign market with support of a local
foreign partner through local partnerships; acquisition of local
firms and joint ventures
Freely choose actors from within the operating network of

identified partners
Build strong business relationship with 'focal' local agents
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Cultivate relationships with key actors such as suppliers /
supply chain of acquired businesses and business partners
Takeover customer bases of acquired companies
Stage 3: The Uncooperative government Cooperative government in

supporting in relation to foreign direct relation to foreign direct
Relationships investment investment from
Cooperation from various Cooperation from Chambers

Spanish governement of Commerce and embassies
initiatives to promote in Brazil and Spain
Spanish businesses overseas
Cooperations from Center for
Export and Investment of
AND Spain (ICEX)
Regulatory body ANATEL

Regulatory body SUBTEL
The controlling
relationships
Successful Strategies Develop supporting relationships in foreign markets and home

country to support and accelerate market entry and market
establishment
Develop coping strategies to deal with the controlling

relationships to persisit with and advance the establsihment
process
Stage 4: The General Political Dictatorship Poltical Democracy

Environment of the
Establishment Process Competitve environment Competitive environment
Cultural affinities Cultural distance
Slow bureaucracy Political stability
385
Lack of institutional Transparent procerdures and
transparency which made strict and beurocratic
rules could be 'bent' in regulations making
relation to compliance with compliance complex and time
regulations making consuming slowing down the
establishment process easier establishment process
and faster
Cultural gap in work and
Cultural gap in work and management practices
management practices
Successful Strategies Customers: Improve and diversify services; reduce costs and
customer leakage
Marketing: Marketing strategy based on building Brand image

and reputation; heavy investment in marketing campaigns
Culture: Invest resources to overcome the cultural differences
Engage in high profile CSR activities to communicate an

environmentally responsible (caring) image to local customers
Large investment in new infrastructure, innovation and in high

technology
Stage-wise regional expansión through competitor acquisition
Notably, while Telefónica benefited from strong supporting relationships from government
bodies such as the Chambers of Commerce in both Spain and Brazil, it also confronted what
we have termed the 'controlling relationships'. Notable among the 'controlling relationships'
were the regulatory bodies, namely SUBTEL in Chile and ANATEL in Brazil. In view of the
findings, we revise Abraha's Four Stage Firm Establishment Model by adding the 'controlling
relationships' to the Stage 3 of the model (Figure 2). There is evidence to suggest that there
exist external 'controlling actors' which protect the local markets in host countries. These actors
have the function of monitoring and controlling the focal relationships between the establishing
firm and the actors involved in the establishment process, and significantly impact the process
of firm establishment as well as the pace of establishment. In order to ensure success, therefore,
386
establishing firms must necessarily cultivate and harness supporting relationships on the one
hand, and manage the controlling relationships on the other.
Figure 2: The Revised Four Stage Firm Establishment Process Model in Foreign Markets
(Adapted from Abraha 1994)
Both Chile and Brazil turned out to be very competitive markets forcing Telefónica to engage
in aggressive supply and demand side strategies. The firm had to invest in new infrastructure
and in high technology to reduce costs on the one hand, and improve and diversify its services
to retain and grow its customer base on the other. In Chile, due to language and cultural
affinities, while cultural differences had less impact, there did exist marked differences in
working practices and attitudes towards corruption necessitating formulation of new strategies.
Telefónica took advantage of the relatively weak institutions and the lack of transparency of
the justice system and bureaucracy in Chile to skip and bypass some regulations dictated by
the antitrust agencies. In comparison, there was higher transparency and more stringent
regulation compliance regulations in Brazil in spite of the country's slow bureaucracy.
Managerial Implications
The strategies adopted by Telefónica S.A. (Spain) to carve out success establishing the firm as
a market leader in Chile and the Brazil, offer useful insights for managerial practices as follows.
Awareness of developments in international markets was critical to timely internationalization.
Quick acquisition of local companies from the very outset was the key to Telefónica launch in
foreign markets and the subsequent accelerated establishment process.
387
Telefónica was clever in utilizing 'supporting relationships' such as the Spanish government's
contacts with the Chilean and Brazilian governments and various government initiatives
promoting Spanish companies in the Latin American markets, to launch itself in these markets.
Identifying and cultivating 'focal relationships' was central to Telefónica establishment process
which permitted the firm to 'take over' the already established customer base and infrastructure
of acquired local companies, as well as to 'catch-up' with local practices and knowhow.
Telefónica developed differentiated strategies to deal with the 'controlling relationships'. In

Chile, the firm used the lack of institutional transparency to accelerate the establishment
process by 'skipping' the various prerequisite compliance requirements. While in Brazil faced
with a relatively more transparent but more complex bureaucracy which could not be bypassed,
Telefónica showed greater patience and developed strategies to ensure full compliance even if
it meant slowing down the establishment process in pursuit of long term success.
Investment in building successful brands was central to strengthening Telefónica market

position and cementing its establishment.
Aggressive marketing and expansion strategies were adopted to deal with stiff local
competition where these strategies were inextricably linked with customer service and quality.
Cultural and language differences were acknowledged with timely investment made in
initiatives that helped to overcome these differences .
Limitations of this Study and Future Research
While data from the Chilean and Brazilian telecommunication sectors permitted useful
comparative analyses of Telefónica S.A. (Spain) establishment strategies, there is clearly a
need to study the Latin American market within a wider perspective not only in terms of
industrial sectors, but also in terms of countries to improve the present underrepresentation of
this important geographical region in the literature. In addition, to gain a better understanding
of the establishment process in the less-structured markets in general, comparative research of
other countries, such as BRICS would serve as a useful framework. With respect to Telefónica,
further comparative studies of the firm's operations in other regions would add to our
knowledge given that the firm operates in ten South American countries, four European
countries (France, Italy, Germany and United Kingdom), in the United States and in China. In
particular, comparative analyses of Telefónica operations in structured-markets with less-
structured markets would offer novel insights into the firm establishment process in distant
foreign markets.
388
Conclusion
While the various theoretical perspectives alluded to in this study advocate the importance of
understanding the 'process' of internationalization, none differentiates the market-specific
context driven nature of the internationalization process. From the firm establishment
perspective, we build on Abraha and Mukhtar (2002) thesis that there is a need to distinguish
between the 'structured- markets' of the developed economies, and the 'loosely-structured
markets' and the 'less-developed markets' of the emerging and developing economies. We note
that the study of the latter is scant in general, and in relation to Latin America in particular. In
order to address these omissions, we set out to study the successful establishment of Telefónica
in Chile and Brazil with a view to identifying the firm's strategic responses during the
establishment process. We found remarkable consistency in strategies followed by Telefónica
in the two markets which delivered equally successful results against stiff local competition.
Telefónica strategized to establish through a combination of local partnerships, JVs and
acquisitions allowing the firm to quickly adapt to the local environment and to seize
opportunities which facilitated its establishment process. The firm was willing to invest where
needed to build a high profile public image and brands.
Based on the evidence, we offer useful contributions to our understanding of the process of
internationalization in loosely-structured markets. We identify the unique characteristics of the
Latin American environment that shape the establishment process of international firms. We
argue that in order to better understand the process of internationalization and firm
establishment, the theoretical perspectives need to incorporate the contextual elements. We
revise the Abraha's model (1994) by adding 'controlling relationships' in view of the findings
that, while cultivating 'supporting relationships' is central to the establishment process, the
control performed by 'external actors' operating in foreign markets with the remit to protect and
regulate the local market is significant. Establishing firms must identify and develop 'coping'
strategies to manage these 'controlling relationships' in conjunction with 'supporting
relationships' if they are to succeed in distant foreign markets.
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390
Customising sizing system as a niche marketing concept for the small
fashion enterprise targeting the full-figured pear-shaped woman:
A South African perspective
Anne Mastamet-Mason,
Department of Fashion Design, Tshwane University of Technology.
MasonA@tut.ac.za
Keywords: Niche marketing, Sizing system, full-figured women, pear-shaped women, Fashion
enterprise
Introduction
Globally, the micro and small enterprises (MSEs) are considered the engines of economic
growth and, MSEs constitute over 90% of total enterprises in most economies (Rogerson,
2000:692). The fashion micro and small enterprises are labour-intensive and provide
employment for unskilled and semi-skilled workers in developing and developed countries
(Barnes, 2005; Nordås, 2004). With its largely unskilled and semi-skilled personnel, the
fashion apparel enterprises contributes over 40% to fashion exports and world apparel goods
(Barnes, 2005). Studies have shown that the fashion enterprises have the capacity to yield
wealth and contribute to a business’ competitiveness when the enterprise capitalises on the
human creativity, technological availability and cheap labour (Nordas 2004). Competitive
advantage allows a business environment to offer the same product(s) as another with more
efficiency, quality and customer service than the other could. Lower prices, higher quality, and
dynamic marketing are usually associated with competitive advantage (Porter, 1985). In a
consumer-centred age, the challenge for any business is to offer tailor-made products to
consumers and not necessarily to give a variety of choices. There is no ‘one size fits all’ in the
current fashion market place since every customer wants to be stylish (uniquely dressed) yet
conform to the current fashion trend. This may pose a challenge for businesses that aim at
consumers from a multi-cultural society, such as the South African society. It is also a challenge
specifically for the apparel industry that needs to provide well-fitted clothes for various ethnic
consumer groups with different lifestyles, preferences, body shapes and sizes (Makhaya, de
Klerk, Adamski, & Mastamet-Mason, 2014).
A fashion business must therefore, identify niche market that they wish to cater for. Niche
marketing focuses on a smaller but detailed and well defined segment of the population
(Rogerson, 1997, 1998b). Niche markets are identified through specific characteristics inherent
in a market or consumers (Dalgic & Leeuw, 1994). Opportunities are then created by
391
recognising the requirements aligned to the specific characteristics of consumers that the
current industry does not satisfy adequately. Makhaya et al. (2014) observe that 59% of South
African women of African descent are endowed with large hips and buttocks, qualifying them
as pear shaped women. Mastamet-Mason (2014) report that the western pear shaped woman
differs significantly from the African pear shaped in terms of drop values. In the case of this
study, pear body shape characteristics of the full South African women are not adequately
catered for in terms of clothing sizes and fit. Lack of appropriate sizing system for this kind of
body type is still a challenge to most fashion retailers and small businesses (Muthambi, 2012:8).
Competitiveness of such a firm will therefore depend on the understanding of those body
characteristics and devising appropriate means to deliver garments that fit and satisfy full
figured consumers with pear shaped body (Mastamet-Mason, 2008). As an approach, the niche
marketing is aimed at being a “big fish in a small pond” where the small enterprise takes
advantage of the inappropriate clothing available in the retail environment and creatively avail
satisfactory garments to the pear-shaped full-figured woman (Dalgic & Leeuw, 1994).
The aim of this study was therefore to identify full figured South African women with pear
shape and understand their current fit problems and challenges experienced when buying
ready-made clothing in a retail environment. Simultaneously, the study aimed at finding out
problems experienced by the same consumers when buying a garment from custom made
tailors. The findings will therefore point out how to synchronise the experiences from the retail
environment with those from custom-made tailors and to come up with a strategy that the small
entrepreneurs can utilise and succeed in the niche market of the full-figured women with pear
shape.
Methodology
This study utilised both qualitative and quantitative research approaches. Participants were
judgementally selected whereby, women who appeared to be larger in the hip region were
approached to take part in the study. The approached women were then measured to ensure
that their drop values fell within acceptable margin of pear shaped description. Drop value is
the difference between bust and the hip circumferences and it was the appropriate measurement
to confirm if the body shape was a true pear-shaped or not. Once the participants qualified as
true pear shaped, they were given two questionnaires to answer regarding fit experiences of the
ready to wear garments obtained from retail environments and challenges experienced with the
custom-made garments and processes involved in the making of the custom-made garments.
The participants were also measured according to a body measurement form adapted from
Mastamet-Mason (2008). Multiple regression analyses were performed on the obtained
measurements, while data obtained from the questionnaires were analysed using descriptive
statistics.
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Results
Body measurements: The results confirms that the western pear shaped indeed differed
significantly from the African pear shaped body. The minimum drop values of a western pear
shaped is 8 cm, while for the African pear-shaped is 23 cm. Since there is significant difference
of 15 cm, the two body types cannot be grouped together.
Consumers ‘current fit problems and challenges experienced when buying ready-made clothing
in a retail environment: regarding this matter, the consumers express dissatisfaction with
appropriately fitting trousers, skirts and shorts particularly around their hips, thighs and waist.
They report that the crotch line and hips are too tight and sometimes do not fit them at all in
the sizes that would ideally fit them. They report that if a garment fits them in the hipline, then
the waist line is usually too loose. The participants highlighted that they always wear differently
sized top from a skirt or a pair of trousers in order to find a garment that is fairly fitting. They
also report that they always take home garments with large waistlines because it fits them in
the hip region, but they always have to alter the garment afterwards.
Consumers ‘current challenges experienced when buying custom-made apparel: Most (80%)
of the participants expressed their disappointment with delayed lead time (The amount of time
that elapses between when a design process starts and when the garment is completed). About
50% of the participants report having their garments distorted or changed from the designs they
initially selected and felt that the designers do not respect their choices. Some (40%) of the
participants felt that the designers are not skilled enough to interpret their designs into
acceptable garments. Sixty percent of the participants report that there are several fitting
sessions that sometimes may be cumbersome to them. Some (30%) point out that there is
usually some misunderstanding between the client and the designer mostly on the style and
time to complete the garment. All the participants expressed that they wished to have ready-to
wear that caters for their body types so as to avoid unnecessary delays and misunderstanding
with designers.
Conclusion and Recommendations:
Based on the inherent problems with the ready to wear and logistical issues of the custom-made
apparel, the small fashion enterprise can focus on the full-figured-pear shaped women as niche
clientele currently not satisfied with the ready-made clothing as seen above. This way they are
able to capture their accurate body measurements and body shapes (Anthropometric database).
From the database of body measurements, they are able to customize size chart(s) for their
customers. Continuous accumulation of anthropometric database will be used to monitor
changes taking place with the clients’ measurements and shapes and will inform either
modification of the existing size chat or re-developing a new size chart.
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Based on a customized size chart, issues of pattern design principles can be experimented and
mastered, thereby empowering them to custom-make the principles for their niche customers.
They can also experiment with various fabric types in relation to fibre content, fabric
construction and textures among others to standardise their design ease and wearing ease
according to:
The fabric characteristic
Customers’ fit preferences (age, personality traits –individualistic approach)
Customers’ functional needs (individualistic and occasion of the garment)
Fashion trend (conformity)
For all these to be accomplished, the fashion entrepreneur needs to attend refresher courses on
size and fit issues and how to understand body shapes and fabric characteristics. A well trained
fashion designer/business owner will then continuously asses new challenges and address them
accordingly for the purpose of business sustainability and satisfied consumer.
References
Barnes, J. 2005. A strategic assessment of the South African clothing sector. Presented at the
Presidency/ComMark Sector Workshop on the 26th of November 2004.
Dalgic, T. & Leeuw, M. 1994. Niche Marketing Revisited: Concept, Applications and some
European Cases. European Journal Of Marketing, 28(4):39-55.
MAKHANYA, B.P. De Klerk, H.M. Adamsk I, K. & Mastamet-Mason, A. (2014). Ethnicity,

body shape differences and female consumers’ apparel fit problems. International Journal of
Consumer Studies, 38, 183-191.
Mastamet-Mason, A. 2008. An explication of the problems with clothing fit experienced by

female Kenyan consumers in terms of their unique body shape characteristics. PhD thesis.
Pretoria: University of Pretoria.
Nordas, H. K. 2004. The global textile and clothing industry post trade agreements on textile
and clothing. Conference proceedings of World trade organization held at Geneva, Switzerland
Rogerson, CM. 2000. Successful SMEs in South Africa: The case of clothing producers in the
Witwatersrand. Development Southern Africa, 17(5), 687-716
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The nature of category management: the case of a grocery retailer in
Kenilworth Cape Town
Albertina K. Jere*
Faculty of Business and Management Science, Cape Peninsula University of Technology,
South Africa. jerea@cput.ac.za
Stella Mashove
Faculty of Business and Management Science, Cape Peninsula University of Technology,
South Africa.
esmashove@yahoo.com
*Corresponding author:
Abstract
The retail industry is very dynamic and fiercely competitive. Over the last two decades retail
market changes have resulted in a shift in power in favour of consumers. This ushered more
consumer centric retail practices including category management (CM) was adopted by South
African retailers. Although it is a common practice in retail, not much research has been done
on CM among South African retailers. This study sought to determine the nature of CM and
assess its perceived significance at a South African grocery retailer in Kenilworth, Cape Town.
A qualitative research design was used and the findings indicated that an adaptation of the CM
process was used at the retailer in this study. Although the process was perceived to be
beneficial to the store, some challenges to its practice were acknowledged. The results have
implications for more effective implementation of CM among grocery retailers.
Key words: Category management, customer value, Grocery retailing, value creation
Introduction
South Africa is a hub of diverse retailers ranging from grocery retailing, furniture, clothing,
health care, and construction to building materials and more. The sector is, however still
predominated by relatively smaller independent retailers. The total retail trade in May alone in
2014 was R60 974 million and for the whole of 2013 total retail trade sales amounted to R698
757 million, indicating that the industry contributes significantly to the country’s economy
(Statssa, 2014). The top four food retailers in South Africa in their order of size are the Shoprite
Group, Pick n Pay, Massmart and the Spar group (Ventures Africa report, 2012).
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As is the case globally, competition in the South African retail sector has increased dramatically
over the last two decades. Consequently retailers have intensified efforts to increase their
customer base and gain customer loyalty (Euro Monitor, 2012). As part of this adaptation to
increasing competitiveness, South African retailers have adopted CM to better clarify their
target market to enable them to effectively serve consumers and gain competitive advantage
(Nielsen et al. 2006; Han, Ye, Fu & Chen, 2014).
Informal discussions with some grocery retail managers in Cape Town indicated that they
found the CM process rather complicated, requiring coordination of too many departments and
role players. These views prompted this study which is aimed at understanding CM practice
and its perceived significance in grocery retailing in the South African context. Although
studies on CM have been done elsewhere not many have been done in the South African context
in spite of the significance of the retail sector and its contribution to the national economy. This
study therefore seeks to address this knowledge gap.
The research unit is part of one of the retail chains in the country and caters for customers in
the middle to upper-income groups targeting living standards measurement (LSM) 7 to 10
(fastmoving). The chain operates throughout South Africa, Namibia and Botswana and focuses
more strongly on fresh produce offering a wider range of choice food items to a relatively
affluent customer base.
Literature review
A consulting firm, The Partnering Group (TPG) is said to have popularised CM in 1990s
(ACNielsen et al, 2006) and it was later adopted by the Efficient Consumer Response (ECR)
bodies in Europe and the United States of America (USA) (IGD, 2003; Basuroy et al. 2001;
UPS, 2005). Over time, CM has evolved from being a product-centric to customer-centric
management tool (Han, Ye, Fu & Chen, 2014). ‘’Category management theory posits that
retailers can maximize their sales in the category through an optimal mix of brands, SKUs, and
pricing that is determined from the consumer’s perspective and is based on historical sales data
(Gruen & Shah, 2000).’’ It has been described as, the management of product categories as
individual business units aimed at improving the results of a retailer and its trade partners (TPs)
by focusing on consumer and shopper needs (Hans et al. 2014; IGD, 2006; UPS, 2005). The
process is based on a thorough understanding of the market and uses consumer data to segment
and target consumers who share similar purchase behaviour (Han, Ye, Fu & Chen, 2014).
Based on shopper needs, wants, shopping patterns and by working through trade partnerships
retailers can deliver an optimal merchandise mix, planogram layout and shop floor navigation
to enhance customer satisfaction and long term loyalty (Nielsen et al. 2006; Rashid & Matilla,
2011; Kraft Foods, 2009; Ramaseshan, Achuthan & Collinson, 2009; Pepe, Abratt & Dion,
2012).
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Through CM, retailers can therefore use product categories to target the ‘right’ consumer
segments and ensure the long-term health of their customer base, while supporting the retail
position and strategy (Nielsen et al. 2006; Han et al. 2014). Shopper loyalty is critical today
because of customer mobility amongst other things. It has been said that successful businesses
will be those that can meet and satisfy consumer needs by combining data, insights and
merchandising shrewdness optimally (Pepe et al. 2012; Nielsen et al., 2006).
CM process
The traditional CM process involves eight steps, category definition, category role
determination, category assessment, performance and scorecard, category strategies, category
tactics, Implementation and finally category review.
The first step involves determining the products that make up the category and its segments.
Normally, all the products in a category included will either be highly substitutable or closely
related. The second step in the process is to assign a category role (CR). This enables the retailer
to determine the role a category will play in the entire merchandise mix (Han, Ye, Fu & Chen,
2014). The retailer first needs to identify the overall strategy and the customer categories in
order to assign the appropriate CR. The CR assigned will determine the allocation of resources
and how the retailer will manage the category. Four category roles, destination,
routine/preferred/core, occasional/seasonal and convenience roles, are commonly used (IGD,
2003; Han, Ye, Fu & Chen, 2014). The destination category role distinguishes the retailer from
competitors in the eyes of the target consumer making it their obvious choice whenever they
want to buy products in that category (Han, Ye, Fu & Chen, 2014). The routine/Core/Preferred
category role delivers consistent competitive value to the target consumer, fulfilling a primary
role in a retailer’s financial performance. The Occasional/Seasonal category role is assigned to
product groups that will change frequently depending on the occasion/season. The convenience
category role reinforces the image of the retailer as the place for one-stop shopping.
In the third step, category assessment, the retailer develops an understanding of the category
and its performance, highlighting opportunities and areas of improvement (IGD, 2003). The
category is assessed from the perspective of the retailer, customer, supplier and manufacturer
to gain a full picture of its performance. Step 4, category scorecard involves setting
performance targets and measures to evaluate the progress of the category business plan. The
scorecard is usually used by retailers and their TPs to keep track of category performance
(Nielsen et al. 2006). Category assessment is undertaken from the perspective of the retailer,
consumer, market and the supplier for better understanding as any of the perspectives could
reveal important opportunities or aspects that need improvement (IGD, 2003; Han et al. 2014).
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In the fifth step, category strategy, the retailer develops category strategies for product
marketing, supply and in-store merchandising to achieve the performance measures set out in
the scorecard. The common marketing strategies are traffic builder, transaction builder, profit
generator, excitement creator, cash generator, image creator, and turf defender, (IGD, 2003)
The sixth step in the traditional CM process is category tactics. It involves determination of the
specific actions that should be taken to achieve the selected category strategy. Category tactics
encompass actions in areas such as pricing, promotions, range, assortment, space,
merchandising, new product development & innovation and product supply (IGD, 2003;
Nielsen, et al. 2006). Step seven, category plan implementation, involves making decisions
about what actions need to be carried out, by whom and when as well as identification of who
would drive the process.
The last step in the process, category review, entails regularly measuring, monitoring and
modifying the category’s performance of the entire process identifying on-going opportunities,
challenges and making modifications if necessary.
Benefits of CM
CM has been hailed as an essential tool in merchandise planning (Pepe et al. 20012). Some
benefits associated with category management include increased sales / turnover, improved
profitability, increased market share, improved return on assets, improved margins, improved
stock turnover and cost reductions (IGD, 2003; UPS Supply Chain Solutions, 2005; Pepe et al.
2012). It has been claimed that proper implementation of ‘’…category management can
dramatically enhance financial results with cost savings of up to 2% of total product category
sales, and sales increases by up to 11% (Pepe et al. 2012: 257).’’ Using CM also contributes to
improved retailers’ knowledge of the needs of their target market thus providing opportunity
to serve their consumers better (Pepe et al. 2012). Other benefits include improved employee
motivation, commitment to work, relationships among employees as well as improved TP
relationships all resulting in competitiveness and improved customer satisfaction (CIPS, 2006;
IGD, 2006; UPS, 2005).
Category management has been described as ‘’…more than a way to manage a category as a
business in today’s business world, as it is essential to operating a successful retail operation
(Pepe et al. 2012, 158).’’
It has been pointed out that to be successful, CM implementation requires solid support
infrastructure including:
A cross functional team trained & continually developing CM knowledge and analytical skills
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Effective management information systems with capacity to collect, analyse, and synthesise
data
An effective internal and external communication system
Strong mutually beneficial relationships with TPs
Measurement tools for evaluation of categories and category managers
A customer centric focus compared to a cost reduction
(CIPS, 2006; UPS, 2005; Dhar, Hoch & Kumar, 2001)
Challenges of CM
Although it has been acknowledged to be a very useful management tool (Pepe, et al. 2012),
CM has also been said to pose some challenges. In this connection, it has been described as a
process which is “…very expensive to develop, implement and maintain (UPS, 2005).’’
The difficulties in developing and implementing an effective CM process can be seen to arise
due to both internal business and market factors. The internal business factors primarily relate
to financial and non-financial resources needed to acquire and setup the necessary support
structures and develop relevant CM skills and knowledge (IGD, 2006; UPS, 2005).
External challenges include TPs who may be unwilling to commit resources required to a
shared category management initiative (IGD, 2006). The lack of support from some large
manufacturers who prefer to trade with larger retailers while smaller chains receive less interest
and support is another challenge that has been associated with CM (Nielsen et al. 2006; Han,
et al. 2014). It is acknowledged that some manufacturers have more CM expertise than retailers.
It is therefore important for retailers to invest in strong mutually beneficial TP relationships
(Gruen & Shah, 2000). On account of challenges faced with use of the CM, modifications to
the traditional process to suit individual organisations’ circumstances in terms of resources,
type and size of the businesses are common.
Various CM adaptations to the process as well as terminology are in use. UPS (2005)
recommended a four step process; Organise, Develop, Monitor and Model, supported by
effective infrastructure. Kraft Foods streamlined the traditional 8 step process to 3 stages. These
steps combine category definition and category role into step 1 referred to as ‘The scope’,
Category analysis and performance into step 2 referred to as ‘Status/Potentials/Objectives’ and
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category strategy, category tactics and implementation into step 3, called ‘Action’ (Kraft Foods,
2009).
Value based theoretical perspective
The philosophy of CM is that value ‘’… is key to a firm's long-term survival and growth (Terho,
Haas, Eggert, & Ulaga, 2012, 174).’’ There are various perspectives on value which have
varying degrees of relevance to CM. Some of these perspectives are customer value creation,
value co-creation, firm value creation (Corvellec & Hultman, 2014; Gummerus, 2013; Pepe et
al. 2012). The customer based value perspective can be product and/or customer focused. The
product focused perspective is based on the tangible and intangible product features enjoyed
by the customer. The customer focused perspective on the other hand is based on the customer’s
definition of value (Grummerus, 2013; Haas, Snehota & Cosaro, 2012; Terho et al. 2012). The
CM approach promotes understanding of the customer’s perception of value and seeks to offer
this value through product feature and customer service in liaison with suppliers.
The value co-creation perspective focuses on the fact that businesses do not exist in isolation.
Consequently value is created in the interaction between businesses and/or between a business
and a customer (Gummerus, 2013; Haas, Snehota & Cosaro, 2012; Terho et al. 2012). Although
the CM philosophy does not seem to acknowledge the customer as an active participant in
value co-creation with the business, there is significant recognition of value co-creation in the
relationship between the retailer and the supplier. Firm value creation on the other hand focuses
on enhancing the value of the firm through the value chain, market segmentation & focusing
on valuable customer segments as well as maximising shareholder return (Terho et al. 2012).
The CM approach can be seen to encompass the above three perspectives. Through customer
data analysis generating a clear understanding of their target market, a retailer using CM liaises
with suppliers to craft value creation processes that include front end and back door activities
to deliver products aligned to the customers’ value expectations. In this way the firm is able to
create and sustain competitive advantage.
Methodology
A qualitative research design was used to collect in-depth descriptive data to allow deep
understanding of the research problem. A sample of forty (40) employees in various positions
involved with CM was selected using judgemental sampling technique. A sample of sixty (60)
customers was selected using the convenience sampling technique.
Two questionnaires, one for the customers and the other for employees, were developed and
used for data collection. Unstructured interviews using an interview schedule were also
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conducted with employees in management positions to generate more data on the research
problem. In agreement with management of the store, the researcher worked on part time basis
at the store for a short period to enable them collect additional data through participant
observation. Data was analysed thematically.
Results and discussion
Respondents were asked various questions to gain an insight into the practice of CM at the
store.
Category definition
Employee respondents were asked to rank-order the three most important attributes that best
describe the manner in which the products were arranged in the store. Product relatedness
followed by consumer usage and package size were ranked in that order as the three most
important attributes used to determine product categories. The results indicated that the
employees interviewed were aware of the attributes used for category definition. Traditionally
category definition is based on product substitutability or relatedness (Nielsen et al. 2006). It
was however interesting to note that there was quite a wide range of attributes, including
particular brands and customer behaviour, not in the top three, which were also identified as
category descriptors. This variety of attributes mentioned could be an indicator of lack of clarity
of category descriptors by all the employees.
Category role
Most of the employee respondents (60%) indicated that dried groceries were the key categories
for the store while 31% mentioned the fresh produce category as the central category. All the
customers indicated that they always purchased non-perishable groceries, fresh produce and
confectionery. Observations suggested that the major part of the dried grocery category
comprising of several categories had been assigned the destination role while the other part
with categories such as cleaning materials, baby and toddler products including fresh produce
and confectionery were part of the routine/core category role. Alignment of the responses from
the employees and customers with the researcher’s observations was interesting. The
destination and routine/core category role CRs are typically used in CM to deliver competitive
advantage to the retailer and value to the customer. They are therefore key in promoting a
retailer’s financial performance (Han, Ye, Fu & Chen, 2014; IGD, 2003).
The majority of the customers (83%) indicated that they preferred to do most of their grocery
shopping at the selected retail store while only 17% indicated preference for other stores. This
was in the light of the finding that only 40% of the customers interviewed lived within 10-15
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minutes’ drive from the store. This was taken to indicate that the store was perceived to deliver
consistent, superior value in its offering to the customers otherwise they would have been
shopping elsewhere.
Category assessment
Category assessment involves examining each category to gain an understanding of the key
category drivers and opportunities. This assessment is the basis for determination of strategies
and tactics needed to increase traffic and capitalise on category sales. To determine if category
assessment was undertaken at the store, customers were asked to rank-order the three most
important criteria which they considered in selecting which retail store to patronise. Selling
price and good customer care were ranked first and second respectively with arrangement of
products in the store, and product quality ranking a joint third.
Category scorecard
When asked what performance measures and targets were used to track the progress of product
categories, most employees (53%) stated that managers used sales. Only 16% indicated
category scorecard with the rest indicating various other measure including gross profit,
inventory turnover and customer satisfactory rating. It was evident that the performance of
product categories was monitored although not necessarily using a scorecard. Traditionally the
category score card is used to evaluate the product categories although there is no universal
combination of elements of the scorecard as these vary depending on individual business
requirements (UPS, 2005).
Category strategies
The semi-structured interview with the manager revealed that the retail store uses traffic
building, image enhancing, cash generating and profit generating marketing strategies. These
strategies are part of the commonly used marketing strategies in CM as discussed in the
literature review above. The interviews also highlighted that a product supply strategy was in
place. This involved minimum product handling and a short order purchasing cycle to ensure
that the store brings to the customer the right quantity of products at the right price, at the right
place, quality and assortment. Clearly, to succeed this strategy requires close liaison with
suppliers.
Category tactics
Observation showed that the retailers pricing strategy drove traffic and sales. There were
variations in prices of stock keeping units (SKUs) in a category according to brand with some
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being low in comparison to others. The private label brand tended to be the lowest priced.
Observation showed that merchandising which involves product space allocation and display
was done according to brand and product type. Most of the customers (80%) stated that they
enjoyed shopping at the store with 75% of them saying that they were always able to locate the
products they wanted. It was evident therefore that pricing, merchandise assortment, space
planning and merchandising category tactics were part of the CM process at the store.
Category plan implementation and category review
The interviews, discussions, observations and document analysis did not show evidence of
implementation of the last two steps in the traditional CM process, category plan
implementation and category review at the store. This could be an indication of adaptation of
the CM process used at the store.
Benefits of practising CM
Most employees and manager at the retail store were of the perception that CM practise was
delivering some benefits to the store. These benefits include increased sales (97%), improved
profitability (88%), improved customer satisfaction (91%), better stock turnover (91%), and
merchandise mix as a stronger competitive advantage (97%). On the other hand 50% felt that
improved employee motivation and commitment had resulted from CM while the other half
felt to the contrary.
Literature is unanimous in the usefulness of CM as a management tool (IGD, 2003; UPS

Supply Chain Solutions, 2005; Pepe et al. 2012). The findings are therefore in line with
literature. It is however significant that a lot of employees (50%) did not think that using CM
had a positive effect on employee commitment and motivation. This could be an indication that
not all employees understood CM and their role in the process. This was collaborated by the
finding that over 80% of the employees indicated that they did not receive CM training and
development. Limited knowledge and skills could therefore be a source of inefficiencies in
employee performance, frustration and lack of appreciation for the significance of the process.
Challenges to CM practise
Much as CM has been lauded for delivering benefits to retailers, extant literature also highlights
some challenges arising from the practice. It has been pointed out, for instance, that the
traditional CM process was ‘’…complicated and restrictive – a by-the book/ one-size-fits-all
approach…” (UPS, 2005). Similarly in the study it was found that most of the employees
interviewed (92%) indicated that there were challenges faced in implementing CM at the store.
Lack of relevant CM skills and employee training as has been discussed above was cited as a
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challenge. The lack of CM knowledge and skills was said to sometimes result in wrong product
classification taking place thus confusing customers. Part of the support infrastructure
identified in literature as antecedent to effective CM was the development of cross functional
teams with training and ongoing development of employee skills.
Communication and management of supplier relationships was also identified as a challenge

faced at the store. Strained relationships with some suppliers had been experienced on occasion
due to disagreement on product category determination particularly for new product
introductions not fitting in existing categories or due to shelf space allocation. Employees also
felt that overreliance on suppliers especially for determination of store layout and category
definition due to inefficient internal CM systems was a problem. The significance of strong
supplier relationships has been emphasised for successful implementation of CM (Gruen &
Shah, 2000; UPS, 2005; CIPS, 2006). This is because the relationship ensures effectiveness in
the back door activities of the CM which support the front end sales related activities. Open
communication, trust and a spirit of long term mutual benefit have been said to be the basis for
good supplier relationship (CIPS, 2006; UPS, 2005). Without these competing interests, with
the supplier seeking to promote their brands in the category while the retailer seeks to enhance
the performance of the entire category, can result in misunderstanding (Gruen & Shah, 2005).
Conclusion
The findings show that there is a CM process used at the store. Also evident was that this is a
modified process which has strong leanings towards the traditional 8 step process. The
modification was clear in the seeming absence of the last two steps. However, although the
results did not show the use of the category plan implementation stage the fact that the first six
steps were in place is enough sign that the CM plan has been implemented although it may not
have taken place in the traditional manner.
Category review has been said to be a very important part of the CM process. It enables retailers
to monitor and evaluate the performance of the category plan in order to identify opportunities
and/or make modifications if necessary for continued benefits (Nielsen, 2006; Pepe et al. 2012).
The absence of category review therefore brings into question the benefits said to be accruing
from CM practice. Without Category review it is difficult if not impossible to determine if there
are any benefits realised from the process. This might account for the mixed perceptions of the
employees with respect to the benefits and perceived significance of using CM.
Some benefits were said to have resulted from using CM but there were also challenges
identified. The challenges are mainly emanating from inadequate skills and training among
employees involved in CM, lack of trust between the retailer and some suppliers.
404
The study has the following limitations. The results cannot be generalised since the study was
limited to only one retail store. Limitations due to logistics and resources made it impossible
to include the supplier perspective of CM. Further research could be undertaken to clarify the
nature of the suppliers/retailer relationship.
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Determinants of Customers Loyalty in the Hospitality Industry: A Study of

Selected Hotels in Asaba, Delta State, Nigeria
Moses C. Olise, Department of Marketing, Nnamdi Azikiwe University, Awka, Nigeria
Shade Elumaro, Department of Marketing, Nnamdi Azikiwe University, Awka, Nigeria
DL: +234-803-6700-014. mchigbata@yahoo.com
* Ikechukwu Moses Okoli, Department of Cooperative Economics and Mgt, Nnamdi

Azikiwe University (NAU), Awka, Nigeria. *
Correspondence Author: DL: +234-803-7568-570. ikemosesokoli@yahoo.com
Abstract
This study examines determinants of customers loyalty in the hospitality industry: A study of
selected hotels in Asaba, Delta state, Nigeria using descriptive statistics and the linear
regression model of the ordinary least square (OLS). Findings revealed that with the exception
of service quality, all other variables-Customer satisfaction, trust, affective commitment, hotel
image, effective relationship, technology- significantly influence customers loyalty in the
hotels studied. The study therefore recommends that hotel operators should focus on Customer
satisfaction, a good hotel image, adoption of modern technology among others because they
have been identified to significantly influence customers decision to patronise hotels.
Key words: Customers Loyalty, Hospitality Industry, Hotels, Regression Model
Introduction
In Nigeria, the hospitality industry, particularly the hotels are increasing in their numbers on a
daily bases in every city and town in the country, thus, leading to serious competition among
the hoteliers in attracting and retaining customers. According to Kandampully and Suhartanto
(2000), one of the greatest challenges facing hotel organizations today is the ever-growing
volume and pace of competition. They further stated that competition has had major
implication for the customer, proving: increased choice; greater value for money; and
augmented levels of service. However, in the face of competition, what sustains a firm is the
loyalty of the customers which results into continued patronage of the firm's products or
407
services. Kandampully and Suhartanto (2000), confirms that loyalty of a firm's customer has
been recognized as the dominant factor in a business organization's success.
Therefore, the hotel industry, in particular, and all businesses whose service depend on building
long term relationship need to concentrate on maintaining customer’s loyalty (Al-Rousan and
Badaruddin, 2010). This is important because it has been confirmed in the literature that
increased competition has forced firms including hotels to constantly look for new ways to be
more attractive and thus more competitive. As the cost of keeping an existing customer is lower
than the cost of acquiring new customers, many firms have launched loyalty programs
(Hikkerova, 2011; Persson, B. & Bertilsson, 2011; Wang, 2007). It costs five times as much to
attract new customers than keeping existing ones (Hikkerova, 2011; Ko, Sook, Myungsoo, and
Young, 2008; Abraham and Taylor, 1999). Consequently, in other to create loyal customers,
factors influencing loyalty need to be ascertained. This is because if they are well known
hoteliers will be equipped with the necessary arsenals to competitively stay ahead of their
competitors.
Statement of the Problem
The hotel Industry, a service provider, plays an immense role in the development of an
economy. According to Poku, et al (2013), apart from its contribution to GDP, it also serves as
a source of employment for many people such as cleaners, cooks, receptionists, security guards,
etc. Arguably, the hotel industry in Nigeria and Delta state in particular is one of the largest
sources of employment for our teaming youthful population. With the proliferation of hotels in
the state as a result of the influx of people into the state for one business or the other, most of
the hotels now face the challenge of increased competition of meeting and exceeding customer
expectation to ensure repeat patronage, which is the bedrock of any business. Perceptibly,
increased patronage is found in loyal customers. Liang (2008) noted that loyalty has become
important over the past few years because of increased competition within respective industries.
In the hospitality industry, there is a novel research in customers' loyalty, but researchers have
approached the concept from varying literally perspectives and research interest. For example,
Al-Rousan and Badaruddin (2010) used service quality to investigate customer loyalty in the
Jordanian five star hotels. Hikkerova (2011) investigated Loyalty Programmes : a study case
in the Hospitality Industry. Persson and Bertilsson (2011) examined how to create loyal visitors
in hotel businesses. Poku, Zakari and Soali (2013) investigated how service quality impacts
customer loyalty in Kumasi, a leading city in Ghana. Filip and Anghel (2009) investigated
customer loyalty and its determinants in a banking services environment. Adeleke and Aminu
(2012) investigated the determinants of customer loyalty in the GSM market in Nigeria.
However, with respect to the topic under investigation, there is no known research on
determinants of customers' loyalty in the hospitality industry in Nigeria, specially in hotels. A
more related works reviewed was the work of Al-Rousan and Badaruddin (2010) and Poku,
408
Zakari and Soali (2013), but there studies were carried out in Jordan and Ghana respectively.
In order to fill the literature and knowledge gap, this study examines the determinants of
customers' loyalty in the hospitality industry: A study of selected hotels in Asaba, Delta state,
Nigeria.
Objectives of the Study
The main objective of the study is to examine the determinants of customers loyalty in the
hospitality industry: A study of selected hotels in Asaba, Delta state, Nigeria. The study intends
specifically to:
Examine the demographic profile of customers in the selected hotels.
Ascertain factors influencing customers' loyalty in the selected hotels.
Literature Review
The Concept of Customer Loyalty
Arguably, in a competitive business environment, competition pits one company against

another in their struggle to attract and retain customers. Organizations like the hotel industry
whose service depend on building long term relationship need to concentrate on maintaining
customer’s loyalty in other to retain the customer. Extant literature is replete with concept of
customer loyalty (Heskett and Sasser, 2010; Eshghi, Haughton and Topi, 2007; Bolton, 2000;
Gronroos and Hadbrook, 1994). According to Jones, Earl and Sasser (1995) and Anderson and
Jacobsen (2000) as cited by Adeleke and Aminu (2012), customer loyalty is customer repeating
purchase intention to some specific products or services in the future or the result of an
organization’s creating a benefit for customers so that they will maintain and increasingly
repeat business with the organization. Furthermore, loyalty is used to describe the willingness
of a customer to continue patronizing a firm’s goods and services over a long period of time
and on a repeated and preferably exclusive basis, and voluntarily recommending the firm’s
products to friends and associates. It is making customers feel committed: When the benefits
are meaningful to them, they will stay on (Adeleke and Aminu, 2012; Grossman, 1998;
Lovelock, 1996)
Factors Influencing Customers Loyalty
Extant literature is replete with factors influencing customers' patronage in different

industries including hotels. According to Poku, Zakari and Soali (2013) and Filip and Anghel
(2009), loyalty comes about as a result of high level of customer satisfaction, good service
409
quality, customer feelings of trust and affective commitment, the positive image of the
company, the relational benefits perceived by the customer that enhance the value of the core
products and services they receive in the hotels or other businesses they patronize. It was also
identified in the literature that customers' loyalty is determined by effective relationships with
customers, customers' satisfaction and technology (Bertilsson and Persson, 2011). Holjevac,
Marković, & Raspor (undated) included customer satisfaction and good service quality as
factors influencing loyalty. A loyal customer does not only engage in repeat patronage but also
provides positive word- of- mouth to other people, thereby increasing the revenue of the hotel.
The implication of this is that a customer's change of patronage would have an impact in the
long-term revenue of the hotel (Poku, et al, 2013). Kandampully and Suhartanto (2000)
included customer satisfaction and image as factors influencing customer loyalty in hotels. In
line with the differences in the findings of previous scholars we conceptualise and proposed
that consumers’ loyalty is a function of customer satisfaction, service quality, trust, affective
commitment, hotel image, effective relationship, technology and price. In line with the above-
proposed function we develop the hypothesis.
Hypothesis
Ho: Consumers loyalty is a function of customer satisfaction, service quality, trust, affective
commitment, hotel image, effective relationship, technology and price do not significantly
influence the consumers loyalty towards patronising the hotels in Asaba, Delta state, Nigeria.
In line with the above-proposed hypothesis, we present a conceptualize schema of determinants

of customers' loyalty in the hospitality industry: A study of selected hotels in Asaba, Delta
state, Nigeria.
410
Fig. 1: Conceptualized Schema of determinants of customers' loyalty
Customer Satisfaction
Services Quality
Trust
Affective Commitment
Customer Loyalty
Image
Effective Relationship
Technology
Price
Source: Author's conceptualization, 2015
Theoretical Framework
This study is built on the Theory of Reasoned Action (TRA). The theory has been applied in
various studies that relate to customer intension to patronize or repurchase intension (kirsten,
2008; Ibrahim and Vignali,2005; Tan and Yeap, 2012; Lim, Tan and Tan, 2013). Ibrahim and
Vignali (2005) applied the theory of reasoned action on a study of Consumer intention to
patronage international fast food restaurants. The study was modelled using the classic belief-
attitude-behaviour intention model (i.e., attitude and subjective norm) based upon the theory
of reasoned action, and an extended model that included variables external to the classic theory.
The Theory of Reasoned Action was developed by Fishbein and Ajzen (1975, 1980), derived
from previous research that started out as the theory of attitude, which led to the study of
attitude and behaviour. The theory was "born largely out of frustration with traditional attitude–
behaviour research, much of which found weak correlations between attitude measures and
performance of volitional behaviours" (Hale, Householder & Greene, 2002, p. 259). The theory
of reasoned action is a model for the prediction of behavioural intention, spanning predictions
of attitude and predictions of behaviour. According to the theory, behaviour is determined by
411
the behavioural intension to emit the behaviour. There are two major factors that determine
behavioural intensions: a personal or "attitudinal" factor and a social or "normative" factor. In
accordance with an expectancy-value formulation, the first component (the person’s attitude
toward a specific behaviour) is proposed to be a function of the salient (behavioural) beliefs
about the perceived consequences of performing the behaviour and the person's (outcome)
evaluation of these consequences. The second component, subjective norms, consists of an
actor's perceptions of what important specific referent individuals or groups think he or she
should do. Subjective norms are a function of the person's (normative) beliefs regarding what
each referent thinks he or she should do and the motivation to comply with these referents. The
relative importance of the attitudinal and normative components in determining intension is
expected to vary according to the behaviour, the situation, and individual differences of the
actor (Ajzen & Fishbein, 1980).
The theory of reasoned action has "received considerable and, for the most part, justifiable
attention within the field of consumer behaviour not only does the model appear to predict
consumer intentions and behaviour quite well, it also provides a relatively simple basis for
identifying where and how to target consumers' behavioural change attempts" (Sheppard,
Hartwick & Warshaw, 1988, p. 325). Ibrahim and Vignali (2005) noted that Consumer
researchers have applied the theory of reasoned action to a wide variety of behaviours over the
years, including the consumption of automobiles, banking services, computer software,
coupons, detergents, food choice, fast food restaurant choice and hotel choice. The TRA model
has however proved its efficacy by exuding a strong predictive utility, even when utilized to
investigate situations and activities that do not fall within the boundary conditions originally
specified for the model”. Ibrahim and Vignali (2005) noted that the extent to which the theory
succeeds in predicting behavioural intention is usually evaluated by means of linear multiple
regression analysis.
In this study, variables external to the theory of reasoned action were included in other to
predict consumer’s behavioural intention to patronize hotels in Asaba, Delta state, Nigeria. The
variables included (food quality, restaurant image, service quality, atmospheric quality,
perceived value, price, quick service, environment, consumers demographics and Modernity)
in the model are drawn from various customer loyalty literature (Al-Rousan and Badaruddin,
2010; Hikkerova, 2011; Persson and Bertilsson, 2011; Poku, Zakari and Soali; 2013; Filip and
Anghel, 2009; Adeleke and Aminu, 2012; Al-Rousann, M.R and Badaruddin, 2010; Poku,
Zakari and Soali, 2013). The variables have in different context explained some variance in
consumer’s behavioural intention to patronize hotels. Thus their inclusion in this study.
Empirical Review
412
From the empirical literature reviewed customers loyalty has been investigated from different
standpoints. For example; Al-Rousan and Badaruddin (2010) examine Customers' Loyalty and
the Impacts of Service Quality in the Jordanian five star hotels using factor analysis and
multiple regression analysis. The results show that dimensions of service quality such as
empathy, reliability, responsiveness and tangibility significantly predict customers' loyalty.
Specifically, among the dimension of tourism service quality, the most significant predictor of
customer loyalty is tangibility. Hikkerova (2011) investigated Loyalty Programmes : a study
case in the Hospitality Industry using the chi-square and t-test statistics. Findings revealed
economic value of the exchange, reputation in terms of quality of the firm, communication,
and shared values as four antecedents of loyalty. Persson and Bertilsson (2011) examined how
to create loyal visitors in hotel businesses using the Correlations analysis, which resulted in
two main findings. (1) Organizational factors such as: size, strategy, and maturity of
information system affect Customer Relationship Management activities where the
development of a customer loyalty strategy affects Customer Relationship Management
activities the most. (2) Customer Relationship Management activities as: bonus cards, service
customization, free-gifts, and convenient check in/check outs affect loyalty where service
customization affects loyalty the most. Poku, Zakari and Soali (2013) investigated how service
quality impacts customer loyalty in Golden Tulip, a 4-star hotel; Miklin Hotel, a 3-star hotel
and Lizzie’s Hotel, a 2-star hotel in Kumasi, a leading city in Ghana by use of the SERVQUAL
model through the study reveals that customer satisfaction is not based solely on the
rankings/classification of the hotels but on service quality that gives value for money which in
turn produces customer loyalty. Filip and Anghel (2009) investigated customer loyalty and its
determinants in a banking services environment. In their study, the existence of favourable
attitudes or positive motivations to customers, constraint factors or inertia, level of satisfaction,
bank’s attitude towards its own customers, the level of customer trust toward the organization
or its employees in ensuring the financial interests of clients, and also the level of customer
commitment were indentified to support the level of customers loyalty to the bank. Adeleke
and Aminu (2012) investigated the determinants of customer loyalty in the GSM market in
Nigeria using Pearson Product Moment Correlation to establish the relationship between the
independent and dependent constructs of the research. The findings revealed that service
quality, customer satisfaction, and corporate image are important determinants of customer
satisfaction and loyalty in the Nigeria’s GSM market. The fourth factor, price/tariff is found
not to be a determinant of customer satisfaction and loyalty in market.
From the literature reviewed so far, customers' loyalty has been investigated from different
standpoints. For example, Al-Rousan and Badaruddin (2010) used service quality to investigate
customer loyalty in the Jordanian five star hotels. Hikkerova (2011) investigated Loyalty
Programmess : a study case in the Hospitality Industry. Persson and Bertilsson (2011)
examined how to create loyal visitors in hotel businesses. Poku, Zakari and Soali (2013)
413
investigated how service quality impacts customer loyalty in Kumasi, a leading city in Ghana.
Filip and Anghel (2009) investigated customer loyalty and its determinants in a banking
services environment. Adeleke and Aminu (2012) investigated the determinants of customer
loyalty in the GSM market in Nigeria. However, with respect to the topic under investigation,
there is no known research on determinants of customers' loyalty in the hospitality industry in
Nigeria, specially in hotels. A more related works reviewed was the work of Al-Rousan and
Badaruddin (2010) and Poku, Zakari and Soali (2013), but there studies were carried out in
Jordan and Ghana respectively. In order to fill the literature and knowledge gap, this study
examines the determinants of customers' loyalty in the hospitality industry: A study of selected
hotels in Asaba, Delta state, Nigeria.
Methodology
Research Design
This study adopts a quantitative survey research design which aims at determining the
relationship between the independent variables and dependent variable in a population
(Micheal, Oparaku and Oparaku, 2012). It is also a descriptive survey research design because
it involves asking questions, collecting and analysing data from a supposedly representative
members of the population at a single point in time with a view to determine the current
situation of that population with respect to one or more variable under investigation (Okeke,
Olise and Eze, 2008). The questions asked are to elicit responses that will answer the research
questions and address the objectives of the research - which is to ascertain factors influencing
customers' loyalty in the selected hotels in Asaba, Delta state, Nigeria.
Area of Study
The study was executed in Asaba, Delta state, Nigeria. The city is significant to this study
because it is the capital of Delta state - one of the major oil producing states in the country- and
also a major economic hub of the state where economic and business activities take place. The
state has hotels of different classes scattered all over the city as a result of the growing number
of consumers and rising population of people that engage in one business activity or the other.
The inhabitants are predominantly traders who are into various kinds of economic activities
and civil service etc.
The population of the study is made up of the customers of four selected hotels in Asaba, Delta
state. Since all the hotels have lodging which is a common feature, the study selected fifty
guests from each of the hotels for investigation. Quota sampling was used to select the sample
of two hundred (200) respondents i.e., fifty (50) respondents each that visit the selected hotels
414
during the period of data collection for this study. The aim of using quota sample was to enable
the researcher reduce bias in sample selection from the population of the study.
The instrument used for the data collection is the questionnaire which was designed and
administered to customers of the selected hotels in Asaba, Delta state, Nigeria. The
questionnaire was titled determinants of customers' loyalty in the hospitality industry: A study
of selected hotels in Asaba, Delta state, Nigeria. The questionnaire has two sections. Section A
and Section B. Section A sought information on demographic profile of the respondents.
Section B was made up of items designed to elicit information relating to the determinants of
customers loyalty in the hospitality industry: A study of selected hotels in Asaba, Delta state,
Nigeria. Using a close ended questions and a four (4) Likert summative scale question of
Strongly Agree (SA) 4 points; Agree (A) 3 points; Disagree (D) 2 points; Strongly Disagree
and (SD) 1 point. The reliability of the instrument were established using test re-test method.
Copies of the questionnaire for the study were administered to twenty (20) customers of one
randomly selected hotel in Asaba, Delta state, Nigeria. The same instrument was administered
to twenty (20) customers of the same hotel after two weeks. The coefficient of reliability for
their responses of 0.851 was established using cronbach alpha. Which was considered high
enough as suggested by Hair, Bush, and Ortinua (2006, p374)..
Model for the Study
Data collected for this study were analysed using linear regression model and descriptive
statistics such as frequencies, percentages, mean, and standard deviation. The demographic
profiles were processed using descriptive statistics, while the hypothesis for the study was
processed using the regression model. All the analysis were done using SPSS version 17.
Linear regression model of the ordinary least square (OLS) approach was used to test the
hypothesis in order to ascertain the influence of customer satisfaction, service quality, trust,
affective commitment, hotel image, effective relationship, technology and price on consumers
loyalty towards patronising the hotels in Asaba, Delta state, Nigeria. The use of (OLS) is
informed by the fact that under normality assumption for ei, the OLS estimator is normally
distributed and are said to be best, unbiased linear estimator. Gujarati and Porter (2008).
The model is implicitly specified as follows;
Y = f(x1, x2, x3 ……. Xn + ei) …………………………………………………… .eq(1)
The model is explicitly specified as follows;
Y = α+β1x1 + β2x2 + β3x3 + β4x4 ……. βkxk + ε …………………………………….eq(2)
415
Where:
α = intercept
Y = consumers loyalty towards patronising the hotels (frequency of patronising the hotels).
Y =α + β1X1 + β2 X2 + β3 X3 + β4 X4 + β4 X5+ β6 X6 + β7 X7 + β8 X8 + ε …………….4
The included variables X1-X8 represent customer satisfaction, service quality, trust,
affective commitment, hotel image, effective relationship, technology and price, β1 – β8 are
the slope coefficients of the regressors, α represents the vertical intercept and ε the stochastic
residual term designed to capture the effects of unspecified variables in the model, which is
normally distributed with a mean value of zero.
Data Presentation and Analysis
Table 1: Distribution according to demographic profile of respondents
Items Frequency Percentage (%) Cumulative (%)
Gender
Male 149 74.5 74.5
Female 51 25.5 100.0
Total 200 100.0
Age
18-30 8 4.0 4.0
31-40 19 9.5 13.5
41-50 125 62.5 76.0
51-60 41 20.5 96.5
61-70 5 2.5 99.0
416
71 and above 2 1.0 100.0
Total 200 100.0
Marital status
Married 122 61.0 61.0
Single 61 30.5 91.5
Divorced 6 3.0 94.5
Widow/Widower 11 5.5 100.0
Total 200 100.0
Educational Qualification
Primary 16 8.0 8.0
Secondary 55 27.5 35.5
Tertiary 129 64.5 100.0
Total 200 100.0
Occupation
Civil servant 21 10.5 10.5
Private Company Staff 44 22.0 32.5
Business/Trading 117 58.5 91.0
Craft 11 5.5 96.5
Students 7 3.5 100.0
Total 200 100.0
417
Income of customers (monthly)
1000-20000 1 0.5 0.5
21000-40000 4 2.0 2.5
41000-80000 44 22.0 24.5
81000-100000 31 15.5 40.0
101000 and above 120 60.0 100.0
Total 200 100.0
Source: Field survey2015.
The demographic profile of the respondents was presented in table 1. The table revealed the
percentage of male to female gender that visits the hotel, 74.5% of the respondents are males
while 25.5% of the respondents are female gender. The implication is that there are more males
that patronize the hotel that female gender. The age of the respondents revealed that majority
of the people who patronize the hotel fall within the age bracket of 41-50years. These constitute
62.5% 0f the respondents. 61% of them are married. With respect to educational exposure,
majority of the customers (64.5%) had tertiary education. The occupation of majority 58.5%
of the customers are mainly business/trading. 60% of the customers who responded to the
questionnaire earn incomes above N 100,000.00 per month.
Table 2: Distribution according to frequency of patronising the hotels.
Items Frequency Percentage (%) Cumulative (%)
Every day 13 6.5 6.5
Once a week 40 20.0 26.5
Every two weeks 91 45.5 72.0
Occasionally 56 28.0 100.0
Total 200 100.0
418
Source: Field survey 2015.
Table 2, reveals the frequency of patronising the hotels by the customers. 45.5% of the
customers who visits a particular hotel do that every two weeks. Followed by 28% of the
customers that visit occasionally and then 20% of the customers visit once every week.
Regression Result
Table 3: Factors influencing customers' loyalty in the selected hotels
Model B Std. error t Sig.
(Constant) 4.536 3.349 1.354 0.133
Customer satisfaction 0.152 0.048 3.167 0.000
Service quality 1.219 0.264 4.617 1.000
Trust 1.332 0.384 3.468 0.099
Affective commitment 0.111 0.019 5.842 0.015
Hotel image 0.221 0.099 2.232 0.026
Effective relationship 1.129 0.103 10.961 0.000
Technology 0.327 0.070 4.671 0.067
Price 1.369 0.181 7.564 0.000
R 0.813
R2 0.742
Adj. R2 0.733
F-statistic 68.546 0.000
Source: Field survey 2015.
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Dependent variable: Frequency of patronising the hotels
The regression analyses shows the precision of the model. The joint effect of the explanatory
variable in the model accounts for 74.2% of the variations in the factors influencing the
behaviour of consumers towards patronising the hotels in Asaba, Delta state.
All the coefficients are (customer satisfaction, service quality, trust, affective commitment,
hotel image, effective relationship, technology and price) are significant. They also show a
positive relationship with the behaviour of consumers towards patronising the hotels in Asaba,
Delta state as proxied by Frequency of patronising the hotels. The F-statistics of 68.5% which
is significant at 0.000 level also shows contribution of the regressors in explaining the
regressand.
Findings
The analysis of the study revealed the following findings:
More of the male gender patronizes the hotels than the female gender.
Majority of the people about 62.5% who patronize the hotel fall within the age bracket of 41-
50years.
61% of customers who visit the hotels are married.
Majority of the customers (64.5%) had tertiary education.
The occupation of 58.5% of the customers ismainly business/trading.
60% of the customers who responded to the questionnaire earn incomes above N 100,000.00
per month.
Customers who visit the hotels more frequently do that every two weeks.
All the coefficients show a positive relationship with the behaviour of consumers towards
patronising the hotels in Asaba, Delta state as proxied by Frequency of patronising the hotels.
With the exception of service quality, all other variables-Customer satisfaction, trust, affective
commitment, hotel image, effective relationship, and technology significantly influence
customers loyalty in the hotels studied.
420
The joint effect of the explanatory variable in the model accounts for 74.2% of the variations
in the factors influencing the behaviour of consumers towards patronising the hotels in Asaba,
Delta state.
Conclusion
In the final analysis, the findings of this study have shown consistency with the finding of the
previous work reviewed in this study. For example, customer satisfaction, service quality, trust,
affective commitment, hotel image, effective relationship, technology and price were all
identified to be significant and also have a positive relationship with the behaviour of
consumers towards patronising the hotels in Asaba. This conforms with the findings of Poku,
Zakari and Soali (2013) and Filip and Anghel (2009), they discovered that loyalty comes about
as a result of high level of customer satisfaction, good service quality, customer feelings of
trust and affective commitment, the positive image of the company, the relational benefits
perceived by the customer that enhance the value of the core products and services they receive
in the hotels or other businesses they patronize. It was also identified in the literature that
customers' loyalty is determined by effective relationships with customers, customers'
satisfaction and technology (Bertilsson and Persson, 2011). We can conclude that these
variables have strong ramifications for the success of hotel business in Nigeria.
Based on the analysis and findings of this study, the researcher therefore recommends that:
Hoteliers who want to build customers loyalty should develop a customer satisfaction and
service quality for their customers
Hotels should strive to earn the trust of their customer by building a long term relationship with
them.
A good hotel image is important as it has shown in various context to influence customers
decision to patronise hotels.
To have a competitive edge, the technology used in service delivery in the hotels should be
modern.
To increase patronage, the hotels should be price sensitive considering the income levels of the
target customer in the area.
Recommendations for Further Research
421
Similar study should be replicated in other states of Nigeria in order to ascertain the extent to
which the variables modelled in this study could predict consumer’s behavioural intention to
patronize hotels.
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Exploring the dimensions of internal marketing in small hotels
Mahama Braimah, University of Ghana Business School, Ghana
mbraimah@ug.edu.gh; mahama_braimah@hotmail.com
Abstract
Internal marketing is posited as a concept that can be employed to positively influence

employees’ to consistently deliver quality service, though researchers are not agreed on what
constitute internal marketing dimensions. There is a paucity of literature on internal marketing
in the small hotels especially in sub-Saharan Africa. This study attempts to determine internal
marketing dimensions in small hotels. Using structured questionnaires, data was collected and
analysed using exploratory factor analysis and scale reliability test. Seven factors emerged as
dimensions of internal marketing (internal communication, staff development, information
communication technology -ICT, fairness, empowerment, teamwork and motivation)
comprising 26 items.
Key Words: Internal marketing, dimensions, small hotels, hospitality, Ghana
Background to the study: Scholars have argued that internal marketing is a tool that could be
deployed to motivate employees to deliver quality service (Rafiq & Ahmed 2000; Chang &
Chang 2009; Narteh 2012). Internal marketing was first proposed as a solution to the persistent
challenge of consistently delivering high quality service (Rafiq & Ahmed 2000), and seen as
the key to satisfying internal employees as a means of realising organisational intent (Berry
424
1981). Internal marketing has further been posited as an effective tool in the management of
change and implementation of strategy (Rafiq & Ahmed 1993; Rafiq & Ahmed 2000).
Promises made by organisations to their external customers, would not be realised unless
employees are motivated and willing to keep such promises (Gronroos 2009). The commitment
of the internal customer is critical for the survival and growth of the enterprise (Berry and
Parasuraman 1991).
Research Problem: Despite the obvious significance of internal marketing in the delivery of
quality service, scholars are not consistent with the conceptualisation of the dimensions of
internal marketing. There is little agreement on the mix of elements that should be employed
by an organisation in an attempt to achieve the objectives of an internal marketing effort
(Ahmed et al. 2003). For instance, Ahmed et al. (2003) investigated communication and
empowerment as dimensions of internal marketing. For Chang and Chang (2009), the
dimensions of internal marketing included employee-oriented measures, internal
communication and external activities. Again, Narteh (2012) conceptualised the dimensions of
internal marketing as empowerment, reward systems, communications and employee training
and development. Similarly, De Bruin-Reynolds, Roberts-Lombard and de Meyer (2015)
considered internal product, internal price, internal promotion and internal distribution as
internal marketing mix elements. Clearly, there is no meeting of minds when it comes to the
elements of internal marketing. This gap is a major challenge with current internal marketing
literature.
However, several of these studies as cited above sparingly focused on sub-Saharan Africa, and
especially so, on the lower-end of the market (small hotel), as conceptualised in this study. A
search of the extant literature suggests that studies on internal marketing practices, especially
in the small hotel sector, and more so in a developing country context are rather limited. This
introduces a gap in the literature. Management values and practices differ considerably between
small and luxury hotels (Lee-Ross & Ingold 1994; Hankinson 1989) implying that findings
from one segment of the industry may not necessarily be applicable to other segments. It is
therefore relevant to determine the dimensions of internal marketing in small hotels in a sub-
Saharan environment, using Ghana as a case in point. This study therefore explores the internal
marketing literature and attempts to develop a broad framework of internal marketing
dimensions that better reflect internal marketing, especially in the small hotel sector.
Internal marketing and the hospitality industry
Researchers have argued that the hotel industry is unique compared to other service industries,
as it provides a home environment for commercial purposes. Studies on internal marketing
have over the years sought to demonstrate the relevance of internal marketing in the
management of employees of the hotel industry. Studies on internal marketing have
425
demonstrated that effective internal marketing practices in the hotel industry results in several
positive outcomes including high service quality delivery to guest (Kandampully 2002; Tag-
Eldeen & El-Said 2011; Sokhatskaya 2013). For instance, Kandampully (2002) argues that,
satisfied employees will ultimately relay their level of satisfaction onto the guest who patronise
their services. Sokhatskaya (2013) posits that, internal marketing enables the provision of high
standards of quality at all stages of the operation of a hotel. Effective internal marketing
practices lead to the establishment of a service culture, development of a marketing approach
to human resource management, information dissemination among hotel employees, and
implementation of a reward and recognition system (Tag-Eldeen & El-Said 2011).
The complex nature of the hospitality industry makes the management of people challenging
and different from other industries (Tag-Eldeen & El-Said 2011). Internal marketing has been
seen as a means of effectively managing employees for enhanced productivity (Yankevich
2004). An excellent internal marketing environment in the hotel would enable employees
provide high service quality. Indeed, several studies have confirmed the importance of internal
marketing in managing employees in the hotel industry (Turkoz & Akyol 2008; Lo, Stalcup &
Lee 2010; Sokhatskaya 2013). Lo et al. (2010) for example, suggested that hotel operators must
first address the needs of employees as a measure to building good relations with customers.
Internal marketing is considered the means by which employee needs can be addressed, and is
therefore the basis of the formation of the relationship between the customer and the employee
in the hotel setting (Sokhatskaya, 2013).
Turkoz and Akyol (2008) found a positive relationship between the level of internal marketing
in the hotel and the level of hotel performance. The effective application of internal marketing
practices in the hotel industry has been shown to contribute to employee job satisfaction
resulting in an increase in positive employee behaviour including cooperation with colleagues
(Arnett, Laverie & Mclane, 2002). In a study of five-star hotels in Egypt, Tag-Eldeen & El-
Said (2011) concluded that internal marketing is an effective tool in promoting and enhancing
employee commitment. In a case study of two hotels, Hedin and Lidstrom (2006) demonstrated
that low employee turnover rate was a consequence of internal marketing practices in these
hotels. Sokhatskaya (2013) also argued that internal marketing enhanced the effectiveness and
focus of the hotel employee.
Objective and significance of the study: A critical research issue arises from the discussions
above. The study attempts to seek answers to the question: what are the dimensions and items
of internal marketing in small hotels? The objectives of this study are therefore to determine
the dimensions of internal marketing in small hotels and the elements that constitute these
dimensions. It is hoped that the study would make a contribution towards conceptualising the
426
dimensions of internal marketing, especially in the small hotel sector. It is also expected that
the output of the study would provide small hotels and their managers with relevant insights
into the dimensions of internal marketing and the elements that constitutes those dimensions.
This would help management understand the factors to employ that would enable them
effectively manage employees to achieve a consistent delivery of high quality service.
Internal marketing dimensions: A major challenge with current internal marketing literature is
the lack of agreement on its dimensions (Ahmed et al. 2003). Despite this challenge, a number
of studies suggest some dimensions. For instance, Berry and Parasuraman (2004) identified
attracting, developing, motivating, and retaining qualified employees as relevant internal
marketing dimensions. Gummesson (1991) considered communication, training, education and
information as internal marketing dimensions while, Varey (1995) identified motivating,
developing and training employees. Ahmed et al. (2003) also suggested strategic rewards,
internal communications, training and development, inter-functional co-ordination, incentive
systems and empowerment while Chang and Chang (2007) proposed training, administrative
support, internal communication and human resource management as internal marketing
dimensions. Service training programmes and performance initiatives were also identified as
internal marketing dimensions (Tsai & Tang 2008). Reading from literature, the study
operationalised the constructs of internal marketing as; internal communication, staff
development, ICT, fairness, empowerment, teamwork, and employee motivation as discussed
below.
Internal communication: Communication within the organisation has become an essential

prerequisite for the well – functioning of internal activities in the organisation and job
satisfaction (Goris, Vaught & Pettit 2000; Ducharme & Martin 2008; McCormick 2008;
Tourani & Rsat, 2012). Communication has been defined by Dwyer (2005) as the process
whereby people within an organization give and receive message. Ahmed and Rafiq (2003)
posit that, communication should be featured at all levels of the organizational hierarchy so
that the behaviour of all employees can be influenced. According to Roberts–Lombard (2010)
organisations, as part of their priorities should improve communication with employees
through different means such as internal newsletter and team work discussion sessions. The
power of an effective internal communication should not be undermined because it serves as a
vital tool as far as internal marketing practices are concern (Lovelock 1999; Dwairi, Bhuian &
Jurkus 2007). Beyerlein, McGee, Klein, Nemiro and Broedling (2003) suggested that
management should align support systems to enable employees communicate their needs as
this will lead to employee satisfaction and effective functioning of the organization. Studies
have noted a positive association between internal communication and employee outcomes (Jo
& Shim 2005; Kim & Rhee 2011).
427
Staff development: Employees are the greatest resources of the organisation (Beyerlein et al.
2003). Managers in the service sector need to train and develop their human capital to be
abreast with changes in the environment and equip them with new skills to deliver service
quality in this era of intense competition. According to Abiodun (1999), training is a systematic
development of the knowledge, skills and attitudes required by employees to perform
adequately on a given task or job. A study conducted by Martensen and Grønholdt (2006)
revealed that, employees who have undergone training and develop new skills and acquire
knowledge are competent, secured and confident in service delivery far better than their
counterparts with inadequate training. Papasolomou (2002) contends that employee
development serves as motivation for their dedication to work and delivering of high service
quality. In the small hotel settings, managers should periodically organise training sessions for
employees about new developments or impending changes as this will help the employee to
reposition and absorb the developments and adjust to the necessary requirements (Byju 2013).
Information and communication technology (ICT): Several scholars agree that the immersion
of ICT in the development of marketing activities can be a true source of competitive advantage
for any company, improving innovation processes and their outcomes (Zeithaml & Bitner
2000; Bond & Houston 2003; Tatikonda & Stock 2003; Neu & Brown 2005; Antioco 2006).
In this study, ICT is seen as the use of state of the art technological logistics (computers, reliable
internet, intercom services) and other technological infrastructure that aid employees to deliver
services on time. According to Zeithaml and Bitner (2000), building a service system and
enhancing service quality excellence requires the use of IT infrastructure. Neu and Brown
(2005) reiterated that, for organisations to compete in an increasingly complex market, staff
ability to use ICT for services is a vital resource. In similar developments, Antioco (2006)
argues that, ICT enables better service delivery and leads to improve cross–functional
communication and service oriented business strategy internally within the organisation.
Sorensen and Lundh–Snis (2001) point out that, ICT serves as catalyst and encourage the
process of transmission and diffusion of knowledge throughout the organisation. In the light of
the discussions above, it can be argued that employees equipped with the requisite ICT tools
and skills will be much more able to deliver high service quality than their counterparts with
inadequate technology and/ or skills.
Fairness: Management must arrange regular meetings with their employees to listen to their
enquiries, complains and recommendations, in order to address the needs of employees on an
individual basis (Roberts-Lombard 2010). The author argues that such a practice will enable
management to institute equity and fair play towards employees in the organisation. Unfair
treatment of employees by management hinders service quality delivery. For instance, most
employees in the same rank usually compare their salaries with each other to ascertain whether
they receive equal pay (Noe et al. 2006). Meanwhile, Suleiman Awwad & Mohammad Agti
(2011) emphasised that a fair reward system coupled with a positive interaction and vision
428
sharing with employees creates more emotionally attached employees and employee
satisfaction. Consequently, fairness as internal marketing tool will help reduce suspicions
among co-workers which will enhance conducive working environment and corporation
among employees.
Empowerment: Employee empowerment is significant in service organisations. Zeithaml and

Bitner (1996) opine that a lot of organisations accept that in order to be responsive to customer
needs, employees need to be empowered to accommodate customer requests, and respond
appropriately to remedy situations when things go wrong. According to Proctor and Doukakis
(2003), the effective part of employee development dwells on empowerment. Empowerment
as an internal marketing dimension means authorizing and enabling employees to act, behave,
think and make decisions to get the job done (Kaner 2014). This enable employees to exercise
their discretion in service delivery (Czaplewski, Ferguson & Milliman 2001). It is when
employers create favourable environments and equip employees with resources to boost their
level of confidence that they are able to effectively take on new responsibilities (Lovelock
1999). Scholars have suggested that, when empowerment is incorporated in the job design of
an organisation, it could enhance employee satisfaction (Evan & Lindsay 1996; Eskildsen &
Dahlgaard 2000). Empowered employees have the opportunity to go beyond scope to satisfy
the firm’s customers (Babakus, Yavas, Karatepe & Avci 2003).
Teamwork: It is important for internal employees to work as a team to satisfy the external
customer. Moingeon and Edmondson (1996 p.166) defined internal team work as ‘‘the extent
to which team members engage in behaviours to monitor performance against goals, obtain
new information, test assumptions and create new possibilities”. A study conducted by Drake,
Gulman and Roberts (2005) revealed that an effective implementation of internal marketing
can lead to better team work. In the hotel business it is equally important for employees to work
as a team and share ideas to harness delivery of service quality. Employees effectively working
as one team with a common purpose can improve the quality of service delivery and
profitability.
Employee motivation: Motivation is an essential element which enhances the performance of

the employee (Papasolomou 2006). Ahmed and Rafiq (2006) ranked employee motivation and
satisfaction as the first phase in internal marketing. The study of Tansey, McHugh and McGrath
(2004) as cited in Amjad and Muhammad (2012) found that management can use internal
marketing to motivate employees to provide the best possible service to customers. In a similar
development, Papasolomou (2006) argues that a lot of companies set a systematic reward
system to motivate its employees to improve their service quality and delivery. The challenge
in the reward system is management’s inability to ascertain the differences that exist between
good, average, and poor performers (Noe, Hollenbeck, Gerhart & Wright 2006). Empirical
evidence from the hospitality management literatures suggests that intrinsically motivated
429
employees exhibit desirable outcomes such as heightened job satisfaction (Karatepe & Uludag
2007). A study by Locke and Latham (1990) found a relationship between employee
motivation and job satisfaction.
Study methodology
The study was designed as a single cross-sectional study. The sampling units for the study were
made up of small hotels in the Greater Accra region of Ghana. The sampling frame for this
population consisted of a register of small hotels in the Greater Accra Region as maintained by
the GTA. Small hotels are conceptualised in this study to include budget hotels and guest
houses as classified by the Ghana Tourism Authority (GTA) which regulates and supervises
the tourism and hospitality sector. Hotels in Ghana are rated from 1 star to 5 stars. Hotels with
no star rating are considered budget hotels and guest houses. A guest house is a hotel that could
otherwise have achieved a star rating status, but that has fewer than 10 guest rooms. A study in
this sector is significant as small hotels constitute about 70% of the total number of hotels in
Ghana (GTA).
The hotels were chosen through a random sampling technique. The hotels were serially
numbered and each number was written on a separate piece of paper and crumbled into a dry
container. The researcher then picked 50 pieces of these crumbled papers at random. The hotels
whose corresponding numbers were picked constituted the sampling units for the study. The
Greater Accra Region is the economic and political capital of the country and according to the
GTA, has about 40% of small hotels in Ghana. It is the researcher’s consideration that the study
sample drawn from the Greater Accra Region provides deep insight into the research subject.
The items used for measurement in the study were derived from the review of relevant extant
literature on internal marketing. See table 1. These items were used to design a structured
questionnaire for the study. The questionnaire was first given to three senior colleagues who
reviewed the instrument and made suggestions. These suggestions resulted in the restructuring
and rewording of parts of the instrument. The questionnaire was then piloted tested among 30
employees randomly selected from 15 small hotels in Accra. These hotels and their employees
were selected as per the same procedure described for the selection of the sampling units and
elements for the main study. Adjustments were made to the questionnaire after the pilot test
before the instrument was rolled out for the survey.
Table 1: Literature sources of the dimensions of internal marketing
430
Item Internal marketing Literature source
dimensions
1 Internal Gummesson (1991); Ahmed et al. (2003); Chang & Chang (2007);
Communication Narteh 2012)
2 Staff Development Berry & Parasuraman (1991); Gummesson (1991); Varey (1995);
Ahmed et al. (2003); Tsai & Tang (2008); Narteh (2012)
3 ICT Zeithaml & Bitner (2000); Neu & Brown (2005); Antioco (2006)
4 Fairness Neo, et al. (2006); Roberts-Lombard (2010); Suleiman Awwad &

Mohammad Agti (2011)
5 Empowerment Proctor & Doukakis (2003); Ahmed et al. (2003); Kaner, (2014);
Narteh (2012)
6 Teamwork Ahmed et al. (2003); Kaner (2014)
7 Employee Varey (1995); Berry & Parasuraman (1991); Ahmed et al. (2003);
Motivation Narteh (2012)
Source:Constructed from literature
The items on the questionnaire were measured on a five-point Likert scale which ranged from
1 (highly unimportant) to 5 (highly important). The questionnaire contained 34 questions, 29
of which measured seven internal marketing dimensions, and five questions related to the
personal data of respondents such as age, gender and nationality. For internal marketing, six
items measured fairness, four items measured empowerment, five items each measured
motivation and internal communication, and three items each measured staff development,
teamwork and ICT. The questionnaires were administered to employees of 50 hotels selected
by a random sampling technique. 250 respondents were targeted, that is, 5 respondents per
hotel. At each selected hotel, the purpose and nature of the research was made known to
management and permission sought from them to conduct the study. Each employee was
represented (identified) by a letter of the alphabet, which were all written on separate pieces of
paper and crumbled into a dry container. The researcher randomly picked five pieces of paper
each from the containers, and these represented the sample for the study. Quantitative data
analyses techniques in SPSS version 20 which included exploratory factor analysis and scale
reliability test were used to analyse the collected data for the study. Exploratory factor analysis
431
and scale reliability test were used as data reduction and reliability test tools to determine
relevant internal marketing dimensions and items, and the reliability of the scale. 180
questionnaires were found to be useful for the study.
Findings and discussions
Descriptive statistics
Majority of the respondents were male, constituting almost 68%. Ages 18 to 40 years
constituted about 90% of respondents, with the age group of 31 to 40 alone constituting 50%
of the respondents. There was no intention to skew the gender composition and age group.
However, the results suggest that more young males are employed in this sector of the hotel
industry. Only 4 respondents had tertiary education. Majority of the respondents fell within the
primary/ Junior High School (JHS)/ Senior High School (SHS) category. This situation is not
surprising because this segment of the industry is the “lower end”, and so is unable to attract
the services of highly educated personnel. This is further illustrated by the fact that over 83%
of respondents had worked for five years or less in these hotels, suggesting that people moved
on as they obtained higher educational qualifications. In terms of nationality, only four
respondents were not citizens of Ghana. The descriptive statistics revealed a high mean score.
From an answer range of 1 to 5, the lowest mean score registered was 3.3111, and the highest
mean score recorded was 4.3111. This means that respondents were highly agreed on all the
items that measured internal marketing, suggesting that the items are a good measure of internal
marketing.
Exploratory factor analyses: The Bartlett’s test of sphericity must be significant (p<.05)) for
factor analysis to be considered appropriate for a given set of data. The Bartlett Test of
Sphericity in this study recorded an approximate Chi-Square value of 3950.395 (df. 325) and
was significant (Sig. 0.000). The KMO measure of sampling adequacy recorded a value of .767,
and this is considered adequate for factor analysis, as KMO index of 0.6 is suggested as the
minimum value for a good factor analysis (Tabachnick & Fidell 2007; Hair, Bush, Babin,
Anderson & Tatham 2006). A correlation matrix was generated from the dataset and it
indicated a large proportion of items with correlations of .3 and above, thus establishing the
suitability of the data set for factor analyses (Pallant 2010). The study contained 29 items which
were subjected to exploratory factor analysis using Principal Component Analysis in SPSS
Version 20 for windows. Only items with eigenvalues exceeding 1 were extracted (Malhotra
& Birks 2007; Pallant 2010), and this resulted in 8 factors which explained 79% of the variance.
To aid in the interpretation of these 8 components, Varimax rotation was performed. This
resulted in 28 items loading onto 8 factors (see appendix 1). However, one item loaded alone
and so was dropped. Another item (encouraged to remain with company) loaded onto a factor
(ICT) which was considered theoretically in-appropriate and was also dropped. This resulted
432
in 26 items loading onto 7 factors. The resulting factors were tested to determine their reliability
and internal consistency, and they registered high alpha values as indicated in table 2.
Scale reliability: A scale reliability test was undertaken to determine the internal consistency
of the items that constituted each of the dimensions of internal marketing. For an item to be
retained in the scale it should have a minimum factor loading threshold of 0.5 (Hair et al. 2006),
register an item-total-correlation greater than 0.3 (Blankson & Stokes 2002) while a factor must
have a Cronbach Alpha score of at least 0.7 (Pallant 2010). All the 26 items were retained after
the reliability test. See table 2. All seven factors were also retained as they all scored high
Cronbach Alpha values, with .782 being the lowest score registered by staff motivation,
and .924 being the highest Cronbach Alpha score, registered by ICT. A scale reliability test
was also conducted to assess the internal consistency of the overall scale. The overall scale
registered a high Cronbach’s Alpha score of .924, meaning that the scale as a whole had a very
high degree of internal consistency, and so was reliable.
Table 2: Factor loadings, reliability of scales- independent variables
Variables No. of Item Item-Total Cronbach’s
Items Loadings Correlation Alpha
(ITC)
Internal Communication` 5 .889
Internal communication strategies exist .644 .717
Interactive communication channels exist .723 .710
Interpersonal communication encouraged .824 .698
Regular communication with staff .762 .776
Unambiguous communication with staff .746 .753
Staff Development 5 .871
Encouraged to give off their best .778 .657
433
Reasonable workload .605 .606
Constant training of staff .644 .715
Learning among staff is fostered .779 .810
Training linked to roles staff play .720 .702
ICT ` 3 .924
ICT facility always in working order .822 .864
ICT facility is appropriate .909 .880
ICT facility enables effective job execution .776 .628
Fairness 4 .839
Fair treatment in salary issues .843 .726
Fair treatment in staff development .834 .650
Fair treatment in promotion .823 .753
Fair treatment in reward/ benefits .560 .577
Empowerment 3 .843
I should be treated fairly in disciplinary issues .697 .715
Encouraged to take initiatives .828 .764
Enhance feeling of self-efficiency .736 .650
Teamwork 3 .903
Effective intra-departmental cooperation .795 .737
Effective inter-departmental cooperation .812 .874
Superiors effectively cooperate with staff .750 .825

434
Motivation 3 .782
Use own judgement in solving problems .655 .584
Competitive salaries paid .774 .616
Competitive benefits paid .873 .670
Source: Constructed from field data
Implications
The study sought to establish the dimensions and elements of internal marketing (IM). The
results show that IM is multi-dimensional and is consistent with findings from other studies
(Narteh 2012; Ahmed & Rafiq 2003). In this study, IM is made up seven dimensions which
comprised 26 items. The dimensions are as follows, ICT (3 items), employee empowerment (3
items), communication (5 items), teamwork (3 items), staff development (5 items), fairness (4
items), and staff motivation (3 items). See table 2. The extant literature has identified
empowerment of employees and teamwork (cross-functional participation), as relevant
elements of IM (De Bruin-Reynolds 2015; Kaner 2014; Narteh 2012; Ahmed et al. 2003). The
effective dissemination of information among employees (internal communication), and the
implementation of a reward and recognition system (motivation) are necessary in the
establishment of an effective IM practice (Narteh 2012; Tag-Eldeen & El-Said 2011). The
education of staff, good communication system using good reward systems were identified as
key dimensions of IM in the hotel industry by Hedin and Lidstrom (2006). Staff management
and training (employee development), as well as communication, have also been identified as
critical IM activities that when instituted in the hotel, enhanced employee productivity (Narteh
2012; Yankevich 2004). The factors established in this study as IM mix dimensions have
largely been identified by various researchers in different studies. However, these dimensions
have not all been identified in one single study as has happened in this study. This work has
therefore offered a more comprehensive conceptualisation of IM dimensions focused on small
hotels in the hospitality sector. It is however interesting to note that though ICT was established
as an IM variable, it has largely been ignored in the IM extant literature though the world is
experiencing an unprecedented ICT revolution with a huge impact on business operations and
management processes.
435
Conclusions and Future Research Direction
Employees are at the centre of the service delivery efforts of hotels. The willingness and ability
of staff to deliver quality service to guests is critical to the growth and profitability of the hotel,
and IM is perceived as capable of achieving this. This study suggests that IM is multi-
dimensional, and for the small hotel is made up of seven dimensions and 26 items. Management
of small hotels should carefully consider the IM dimensions and their respective items. This
would aid them in the effective deployment of practices that may lead to the manifestation of
the benefits of IM in the hotel work environment and help induce a consistent delivery of
quality service. The study was contextualised in the “lower-end” of the hotel industry in a
developing country. The study could be replicated in other jurisdictions, and also in the “upper
segment” of the hotel sector. This would help determine the reliability of the factors and items
identified in this study. It would also be interesting to establish whether or not the factors
identified in this study would be relevant in the public sector and in other industries beyond the
hotel sector. The impact of the IM dimension on such factors as employee commitment and
satisfaction could also be studied.
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Moving Toward Capturing Consumer Attention: A Content Analysis of
Ghanaian Radio Commercials/Advertisements
Maxwell Ofori Nkrumah

TBWA\MARKCOM 30 Ferrar Avenue, Adabraka P. O. Box AN 19630, Accra-North,
Ghana.
advertmaxwell@yahoo.co.uk
Cynthia A. Bulley
Central Business School, Central University, Ghana
Correspondence: Cynthia A. Bulley, Central Business School, Central University, Accra,
Ghana.
ayorkorb@hotmail.com
Abstract
The aim of the study is to categorize radio commercials, determine which format is more
appealing and whether humorous content appeal more to consumers or not. Content analysis is
used to review 100 radio advertisements (ads) “running’ in Ghana. Adverts (ad) produced in
the English language were purposively selected and analyzed by10 participants. The findings
uncovered twelve (12) categories or formats of radio commercials. The most appealing radio
ads are the drama clips and humorous content ads. The paper contributes to knowledge
pertaining to ad patterns and formats used in radio clips and the humor factor in ads.
Key Words: Advertisement, radio, content analysis, appeal, creativity attention, Ghana
Introduction
Advertising messages are everywhere and consumers cannot wish them off. In a bid to ensure
that the right commercials are aired to attract the busy and technologically driven consumers,
the type, flow and content of advertising clips play a major role in its viewership. Consumers
are flooded with all forms of ads and appealing content ensures that budgets for advertising are
maximized. This means quality and creativity is vital. In addition, ads should appeal to its
audience. It is the appeal factor that generates or solicits that interest required to capture
consumer attention. Advertising’s key role is communication with a purpose, and the purpose
is to “inform, remind and persuade” consumers (Kotler and Keller, 2012, Belch and Belch,
2009). Thus persuasive advertising has become more important as competition in business
increases and this is making organizations to constantly increase ad expenditure and budgets
in response to the marketplace. The situation is leading to consumers having several ads
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clamoring for their attention. Some researchers have described this phenomenon in different
ways. Kotler et al. (2012) call it the advertising age, Belch et al. (2009) put it simply as
information driven advertising and Rossiter and Percy (1997) as digitized ad age. But the side
effect is the syndrome called “ad-voidance” which literally refers to consumers’ conscious
drive to avoid ads of less importance (Bagwell, 2001). Elliot and Speck (1998) described this
phenomenon as the purposeful avoidance of ads which is leading to the mounting efforts to
grab consumer attention. Advertiser and organizations are constantly looking for ways to get
consumer attention. This has become so important that it is driving competition for ad contents
and messages that performs magic on target audience. The rising cost of ad budgets are directly
correlated to this factor - consumer attention. Advertisers and marketers are now paying much
attention to particular trends in content, flow and type of ads. This puts consumers in the
position to determine what to view or listen to at any point in time. In effect, it takes ads of a
certain caliber to capture consumers’ attention (Refaie, El Sahn and Tantawi, 2013). This
means much effort must be made to get consumer attention. The role of attention to advertisers
– copywriters, scriptwriters and content developers is enormous. In the context of human
information processing in psychology, attention facilitates or inhibits information selection.
This process takes place in the consumers’ mind and it creates the ability to make choices as to
which information to enhance or facilitate by processing or inhibit and avoid. The onerous
therefore fall on advertisers and ad agencies to face the challenge of attracting consumers with
clips of interest.
Advertising is a prominent feature of modern business and considering the huge investments
clients make annually towards it, a review of messages, methods and effects is in the right
direction. A report by the Advertising Association of Ghana (AAG, 2015) indicates that
advertising expenditure in 2013 and 2014 were 493,860,092.00 and 857,944, 274.36 Ghana
cedis respectively. Radio advertising is very popular in Ghana, due to the massive transmission
coverage. It is the dominant media outlet, primarily due to its ability to reach all corners of the
country and it is relatively cost effective as compared to other media (Marmori, 2009).
According to a marketing communications spend analysis report by Synovate (2010) in terms
of volume of advertising spending in Ghana, radio is second to TV. Radio received thirty-four
percent (34%) of media spend budget for that period. Its high frequency rate makes it an easy
and effective medium to target groups of consumers though the effects wear out faster because
the message is repeated frequently (Johansen, 2011). In retrospect, the knowledge of the
common trends and formats/categories of radio ads in Ghana will help determine which
format(s) appeal(s) most to Ghanaians. When this is discovered, it will offer an excellent
insight for various businesses and their respective ad agencies, in creating appealing and
effective radio ads to reach their target audience. The overall purpose of this research is to
determine which radio ad format(s)/style(s) is/are most appealing to Ghanaian consumers.
However, the specific aims of this research are:
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to identify the various categories of radio ads in Ghana.
to establish which radio ad format(s) or categories appeal(s) most to Ghanaians.
to determine whether radio ads with humorous content appeal to Ghanaian consumers.
The objectives delineate the line of enquiry followed by the study. The rest of the paper is
organized as follows: the literature review and empirical studies in the field is followed by the
methodology, data analysis and discussion. The conclusion including a discussion on
managerial implications and recommendations for future research follow respectively.
Rationale for the study - Issues and Problems
In today’s modern and fast paced cities consumers busily go about their duties leaving not
enough time for other activities. Radio is almost an indispensible everyday companion that can
be found on most devices like telephones, in cars or portable sets This gives it a strong
competitive advantage of effectively reaching consumers most of the time than other media or
channels of advertising. Despite the extensive use of radio commercials to market goods and
services in Ghana, there have been little studies regarding format and appeal. Arthur, Fumi and
Martin (2012), examined the linguistic strategies used in advertising products and services in
the Ghanaian electronic media. The study revealed that advertisers achieve effective
commercials through “repetition, alliteration, double entendres (ambiguity), catchy words,
exaggeration, persuasion, superlatives, and the use of Pidgin English” (Arthur et al. 2012). The
researchers further added that advertisers choose to use English language very often as the
medium of communication on the Ghanaian market because it provides a common medium
notwithstanding the different dialects spoken. A commercial in English language therefore has
international appeal. Hence this can be a first point in categorizing the content of radio ads. In
the absence of sufficient studies in the area of Ghanaian radio advertising, this study examines
radio commercials to determine which format(s)/categories appeal(s) most to Ghanaians. The
study extends that of Arthur et al. (2012), which only considered language used in electronic
media advertisements in Ghana. This study reviews varying formats and styles in trying to
create awareness to sell various products and services. The problem is how firms and
advertisers discover which particular format(s) of radio advertising appeal(s) most, to Ghanaian
consumers. The study will address the following questions:
RQ1: What are the various radio ad formats or categories in Ghana?
RQ2: Which radio ad format(s)/categories appeal(s) most to Ghanaian consumers?
RQ3: Do radio ads with humorous content appeal to Ghanaian consumers?

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The Literature so far
Advertising‘s unique communication function can be seen as ‘speech’ or messages that

represent or match products and services with individuals who identify with those goods.
Advertising elements or structure distinctively involve developing trustworthy appealing
messages that is well coordinated in form and style to generate attention and influence the
receiver. Knowing the structure or format, style and words to use is the main ingredient to
getting the attention grabbing variable. Consumers are exposed to a large amount of advertising
commercial messages daily (Kotler and Armstrong, 2011; Belch and Belch, 2009). The efforts
to break through that clutter call for advertiser messages that ‘stands out’ and deliver the brand
information (Pasadeos, Shoemaker and Campbell, 2009). Belch and Belch (2009) call out for
“compelling, distinctive and memorable” phrases that capture consumer attention. Although
Kotler and Armstrong (2011) argue for a creative concept that integrates other forms of
communication and entertainment, ad messages should make the effort to capture attention to
break through the clutter of commercials. In developing advertising plan today, there is the
need for a focused strategy that transcends the storm of the new digital and interactive media.
This begins with planning the entire ad campaign. The objectives should lead to strategies that
create the message and the medium to be used to disseminate the information (Kotler et al.
2011; Clow and Baack, 2002; De Pelsmacker et al. 2002). Clow et al. (2002) further contend
that the major decisions involved in developing ad should drive the type of messages put out.
In planning the ad strategies, more imaginative, entertaining and engaging messages can be
developed to achieve campaign objectives. Thus the message formats and style are the key for
effectively capturing consumer attention. It is a case of generating ideas that are creative and
captivating in messages to get that ‘attention’ variable (Hurman, 2011). The formats, style and
appeal factor has been purported by academic authorities as the means to achieving
ad ’attention’ factor (Kotler et al. 2011; Hurman, 2011; Belch et al. 2009).
Creativity, Structure and Execution Style – Key to the Attention Variable
Ad messages are numerous and can be classified under various factors depending on the
communication form, appeal or style (Kotler et al. 2011; Schiffman and Kanuk, 2007; McGuire,
1969). Kotler et al. (2011) and McGuire (1969) used the “rhetoric” in the message to categorize
the type of appeals in some adverts. Hurman (2011) go beyond the rhetoric to examine other
forms of appeal such as found in entertainment. This makes it difficult to categorize specific
appeals that can be standardized. This brings in the question of creativity that would generate
the compelling ideas that appeal to targeted audience. Research relating to ad formats and style
has been discussed at length by various researchers (Kotler et al. 2011; Faber, 2004; O’Keefe,
2002; McCombs, 1994). The order of presentation, repetition and implicit and explicit
conclusion of messages play a significant role. Also the timing of the presentation affects the
message itself. The use of repetition is a characteristic that go a long way to expose the audience
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to messages that influence memorization and recall. Implicit or explicit conclusion may have
significant effect on broadcast media but may not be as important in others. Structured formats
and style only guide execution but compelling concepts in messages determine the type of
appeal for the ad campaign. The appeals, Kotler et al. (2011) posit, should be “meaningful,
believable and distinctive” to execute the ad message. Hurman (2011) and Kotler et al. (2011)
have advanced arguments that execution is what captures the target audience attention and
interest and should be done carefully. Nan and Faber (2004) have also argued that it is the
totality of activities in a process that captures the attention and interest. In effect, the formats
depend on the media and the execution style depends on the objectives of the advert.
In classifying radio commercials, Warner (2009) observed that “jingles, testimonials, drama,
humor, straight information” can be used to categorize the types and appeal. These types of
classification of commercials cover its structure, type and purpose. This formed the basis for
analyzing Ghanaian radio commercials to determine the common format or trend to address
research question (RQ) 1 and 2. A study by Gallup and Robinson (2008) affirm the common
formats in radio commercials in the US. The study concluded that “strong beginnings” in ad
message, the words used; how the brand is conveyed and the timing significantly affects appeal,
attention and interest. Another important factor is originality in the messages which should be
balanced. It should not overshadow the message itself (Hurman, 2011; Shimp, 1997). In Ghana
radio ad make extensive use of humor as a strategy and this has had enormous appeal and
response from audience (AAG, 2015, Okwabi, 2010; Amoah, 2010; Arthur et al. 2012). It is
for this reason that the study sought to determine the appeal of humorous clips in RQ3. Various
literatures can be advanced but the study’s quest to derive information on formats and appeal
of humorous content restricted the researchers to thematic issues.
Methodology and Sources of Data
The research proceeds through a five-stage-model. These are, Ad sampling; Ad

categorization/coding; experimentation, content analysis and conclusion. The content analysis
follows Neuendorf’s (2002) and Shoemaker and Reese’s (1996) behaviourist tradition which
focus on the effects that is produced in the approach. Using purposive sampling techniques,
one hundred (100) Ghanaian radio ads, produced in the English language were selected.
Purposive sampling was used to allow for flexibility in selecting the ads. The sources of
materials were direct recording of live radio broadcasts/clips on Joy Fm, Citi Fm, and Sweet
Melody Fm, and the researchers' personal archives. The archives consist of ads collected as a
result of professional experience as Copywriter for three (3) top advertising agencies in Ghana.
The agencies are Primus advertising, Admedia FCB and TBWA\Markcom. The selected ads
were analyzed carefully and categorized or coded. Two coders were used to ensure intercoder
reliability which is essential for validating human coding (Neuendorf, 2002; Tinsley and Weiss,
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1975). This resulted in the discovery of twelve (12) distinct groups or categories or formats of
radio ads in Ghana. The details of the categories are as in table 1:
Category Definition
Uni- Radio ad where 1 person delivers raw information on a product/service, with

Announcer no attempt to dramatize
Duo- Radio ad, where 2 people deliver raw information on a product/service, with
Announcer no attempt to dramatize, dialogue, or tell a story.
Full drama Radio ad involving a dramatic interplay of two or more people who
dramatize a product or service offering, with a story. It may end with an
announcer’s rendition of the tagline or payoff of the brand.
Semi drama This kind of radio ad partly involves a dramatic interplay of two or more
people who dramatize a product or service offering with a story; and an
announcer who introduces the ad and/or summarizes the ad in the end. The
announcer’s voice may even be a character from the drama.
Full Jingle This involves a musical rendition of the entire product or service offering. It
may also end with an announcer reading the tagline or payoff of the brand.
Semi Jingle This partly involves a musical rendition of a brand’s offering, and partly, an
announcer’s rendition of the summary of the brand’s offering.
Phonelogue This radio ad involves a dialogue or dramatic interplay of characters talking

on a telephone. It may end with an announcer’s rendition of the tagline or
payoff of the brand.
Full This radio ad involves a direct conversation between two persons about a
Dialogue product or service offering. It may also end with an announcer’s rendition of
the tagline or payoff of the brand.
Semi This radio ad partly involves a conversation between two persons about a
Dialogue product or service offering; and partly, an announcer’s rendition of the
summary of brand’s offering.
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Full This radio ad involves a dramatic rendition of a product/service offering by
Monologue one person. Unlike the Uni-Announcer, this delivery has a story. It may end
with an announcer’s rendition of the tagline or payoff.
Semi This radio ad partly involves a dramatic rendition of a product or service

Monologue offering by one person who tells a story; and partly, an announcer’s rendition
of the introduction and/or summary of brand’s offering.
Medley Finally, this radio ad format partly involves an amalgam/combination of two

or more distinct scenarios or stories; and partly, an announcer’s rendition of
the introduction and/or summary of brand’s offering.
Table 1: Ghana radio ad categorization, developed by Ofori Nkrumah and Bulley, 2015
Based on the categorization a questionnaire was developed. Each of the radio ads was played
to the group of ten (10) respondents (five males and five females) via a laptop connected to an
external speaker. The ten respondents were randomly selected for anonymity. Each respondent
was provided with questionnaires to assess the level of appeal of each radio ad played, using a
five-point Likert scale. Each of the participants was also required to indicate their reason for
assessment of each radio ad. The radio ads with the highest levels of appeal are analyzed. The
findings of the content analysis are discussed in detail below. The characteristics of the ads
which were most appealing are fully discussed.
Data Presentation and Discussion of Findings
The experiment was conducted in two (2) separate sessions over a period of two (2) days. At
each session, respondents assessed fifty (50) radio ads within an average duration of sixty (60)
minutes. The ten (10) respondents were asked to rate each ad. The variables were, funny,
creative/innovative, informative, believable, not funny, not creative/not innovative and not
believable. There was also a portion for any other choices not on the list provided. Two of the
variables, informative and believable, were based on an assertion by Kotler and Armstrong
(2011), that, advertising appeals should have three characteristics; that is, “meaningful,
believable and distinctive”. A summary of the results of the experiment can be found in
appendix 1.
After collecting and collating the data, three (3) classifications of results were derived, based
on the total ad-score points, as scored by individual respondents. Radio ads which scored
between ten (10) and twenty-nine (29) points were classified under unappealing; radio ads
which scored between thirty (30) and thirty-nine (39) points were classified under neutral; and
those which scored forty (40) points and above, were classified under appealing. Based on the
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above criteria, only eleven (11) out of the total number of 100 radio ads studied, passed as
appealing to the respondents; 77 were neutral; and 12 were unappealing. For the sake of
research questions 2 and 3, radio ads classified under the appealing category were analyzed
further to determine the formats and characteristics.
The highest scoring radio ad, was the ‘drop that yam campaign’ by Tigo which scored forty-
five (45) points. This was followed by the ‘Nourishing generations’ campaign by Nestle Ideal
milk, which scored forty-four (44) points. The next highest scoring radio ads were the ‘better
service’ campaign by CDH insurance; the ‘Bananas and Groundnuts’ campaign by Roverman
Productions; and the ‘you first’ campaign by the Universal Merchant Bank (UMB) scored
forty-two (42) points each. Scoring forty-one (41) points each, were the ‘We want to grow with
you’ campaign by Beige Capital Limited; the ‘creamy goodness’ campaign by Nestle Ideal
Milk; and the two ‘Kele and Wele’ campaigns by the Ministry of Trade and Industry. The final
batch of appealing ads, scoring forty (40) points each, were the ‘it’s your life it’s your choice’
campaign by the Ghana Health Service and USAID; and the ‘your partner for life’ campaign
by Latex Foam Limited. This is illustrated in the Figure 1below:
Fig. 1: The scoring of top eleven (11) radio ad campaigns by respondents
Analysis of the appealing radio campaigns - As indicated, the total ad scores for each of these
ads were forty (40) points and above.
Drop that Yam campaign by Tigo Ghana
Among the radio ads experimented, this campaign was highly appealing, scoring as high as
forty-five (45) points. Using the categorization of radio ads as coded in the methodology, this
radio concept can be classified as a Semi drama clip. This kind of radio ad partly involves a
dramatic interplay of two or more people who dramatize a product or service offering with a
450
story; and an announcer who introduces the ad or summarizes the ad at the end. This Tigo
campaign involves two characters who engage in a humorous drama about a phone. This fifty-
five (55) seconds radio ad starts with a drama, and halfway to the end, an announcer
summarizes the campaign’s offer.
All ten (10) respondents agreed that the ad was funny; 8 agreed that it was creative; five (5)
said it was informative; and five (5) respondents were also of the view that it was believable.
This means humour and creativity were major influencers of respondents’ choice of this ad as
appealing. The findings support earlier research conclusion that, originality/creativity of ads,
is at the heart of advertising effectiveness, because it captures consumers’ attention and makes
ads more memorable. Furthermore, Romeo adds to the humour by insisting that the phone has
torchlight, as well as its ability to call “Brekum” and its surroundings without the chip (sim
card). “Brekum” is a suburb of the Brong Ahafo region of Ghana. Another revelation is that,
this radio ad made great use of repetition, which was to create recall. The word “yam” was
repeated four times in the ad. No doubt everyone in Ghana is familiar with the “drop that yam
campaign”. Now in Ghana, every “non-smart” phone is called a yam. A vivid summary of the
results can be found in appendix 1: table 3
Nourishing generations campaign by Nestle Ideal Milk (Nestle Ghana Limited)
This campaign scored as high as forty-four (44) points. Using the categorization of radio ads,
as coded in the methodology, this ad can be classified as a full jingle. A full jingle involves a
musical rendition of the entire product or service offering. It may also end with an announcer
reading the tagline or payoff of the brand. In this soothing jingle for Ideal milk, there was a
clear and emotional story line about a family which was sang alongside great instrumentation.
The words of this forty-five (45) seconds jingle simply read, “From granny to me, from me to
my daughter, one- milk remains ideal…” The music ends with a male announcer who renders
the tagline beautifully. The jingle also makes great use of alliteration and repetition. Alliteration
refers to the use of words with the same consonant sounds; whereas repetition deals with the
replication of a particular word, more than once for a desired linguistic effect. In this jingle,
alliteration occurs in the use of the words “me” and “to” as in “from granny to me, from me to
my daughter”. Repetition also occurs in the use of the word “ideal”. The finding here, supports
the study by Arthur, Fumi and Martin (2012), which revealed that, the advertiser in Ghana
achieves effective commercials through “repetition, alliteration, double entendres (ambiguity),
catchy words, exaggeration, persuasion, superlatives, and the use of Pidgin English” language.
Seven (7) of the respondents agreed that the jingle was creative; four (4) agreed it was
informative; four (4) said that it was believable; one (1) respondent indicated that it was
interesting and touching; one (1) also indicated that it was catchy and nostalgic; and also one
(1) indicated that the jingle was enjoyable. Overall, creativity was a major factor that influenced
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the respondents’ choice of this ad as appealing. It also supports an earlier study which
concluded that, originality/creativity of ads creates appeal and interest However believability
and information also accounted for respondents’ choice of this ad as appealing. Kotler and
Armstrong (2011), posit that, ad appeals must be “believable, meaningful and distinctive”. The
findings here support two of the proposed variables or characteristics of ad appeal; being,
believable and informative; in addition to creativity. A vivid summary of the results can be
found in appendix 1: table 4.
Bananas and Groundnuts campaign by Roverman Productions Limited
This radio ad for a play/theatre event scored forty-two (42) points. The ad, which is ninety (90)
seconds long, can be classified as a semi drama because it is partly drama, and partly, an
announcer’s introduction and summary of the ad’s offering. Six (6) respondents agreed that the
ad was funny; six (6) also agreed that it was creative; six (6) agreed it was believable; and five
(5) agreed it was informative. It can be concluded that creativity, humour, informative and
believability were the major influencers of respondents’ choice of this ad as appealing. Again
this finding supports two of the variables or characteristics of ad appeal, proposed by Kotler
and Armstrong (2011), being informative and believability. A summary of the results can be
You First campaign by Universal Merchant Bank (UMB)
Another ad which scored forty-two (42) points was the You First radio campaign by UMB.
Using the coded categories indicated in the methodology, this fifty-seven (57) second
commercial can be classified as a full monologue. The ad involves a dramatic rendition of a
product or service offering by one person. Unlike the raw delivery of product or service
information by a voice over artiste, a full monologue is performed by one person, and it has an
inbuilt story with a clearly defined setting and characterization. It may end with an announcer’s
rendition of the tagline or payoff. Six (6) respondents agreed that the radio campaign was
creative; five (5) said it was believable; three (3) agreed it was informative; one (1) believed it
was direct and touching; and one (1) respondent believed that it was a great ad. This means
creativity and believability were the major influencers of respondents’ choice of this ad as
appealing. Originality/creativity of ads captures consumers’ attention and makes the ad more
memorable. It was also observed that repetition was intentionally used for a desired effect in
this ad. The word “you” was used fifteen (15) times in this ad. It might have contributed to the
ad’s effect on respondents, since it is likely that they might have personalized the message.
Again this finding supports the study by Arthur, Fumi and Martin (2012), that, the advertiser
in Ghana achieves effective commercials through repetition, alliteration, double entendres
(ambiguity), catchy words, exaggeration, persuasion, superlatives, and the use of Pidgin
English. A summary of the results can be found in appendix 1: table 6.
452
Better Service campaign by CDH Insurance Limited
This radio ad also scored forty-two (42) points. Using the coded categories in the methodology,
it can be classified as semi drama. Three (3) respondents said it was funny; Eight (8) consider
it as creative; five (5) agreed it was believable; five (5) also believed it was informative; and
one (1) respondent believed that it was based on a true life experience. This means that
creativity, believability and information were the major influencers of the respondents’ choice
of this ad as appealing. The references to creativity and humour above apply here too. Hence,
in this ad, the most essential information (better service) was clearly delivered through a
humorous drama. A vivid summary of the results can be found in appendix 1: table 7.
We want to grow with you campaign by Beige Capital Limited
The radio campaign scored a total of forty-one (41) points. Using the coded categorization of
radio ads, it can also be classified as a full jingle. The ad is a musical rendition of the service
offering of Beige Capital, which ended with an announcer reading the tagline. Seven (7)
respondents agreed that the jingle was creative; three (3) said it was believable; two (2) agreed
that it was informative; and one (1) respondent believed that the jingle was emotional. It means
that creativity was the major influencing factor of respondents’ choice of this jingle as
appealing. This supports an earlier research conclusion, that originality/creativity of ads, is at
the heart of advertising effectiveness, because it captures consumers’ attention and makes ads
more memorable (Kotler et al. 2012; Belch et al. 2009). Repetition was also used in this ad for
a desired effect. The phrase “Beige Capital” was repeated six (6) times in the Jingle; also
supporting the study by Arthur, Fumi and Martin (2012), that, the advertiser in Ghana achieves
effective commercials through repetition, alliteration, double entendres (ambiguity), catchy
words, exaggeration, persuasion, superlatives, and the use of Pidgin English. A vivid summary
of the results can be found in appendix 1: table 8.
Creamy goodness campaign by Nestle ideal milk
This is another appealing full jingle scoring forty-one (41) points. Five (5) respondents believed
it was creative; four (4) agreed it was believable; two (2) believed it was informative; one (1)
believed it was a catchy tune; and one (1) also believed it was just okay. It can be concluded
that creativity was the major influencing factor of respondents’ choice of this jingle as
appealing. Another support for an earlier research that, originality/creativity of ads, is at the
heart of advertising effectiveness, because it captures consumers’ attention and makes ads more
memorable (Kotler et al. 2012; Belch et al. 2009). A vivid summary of the results can be found
in appendix 1: table 9.
Kele and Wele campaign (Part 1) by the Ministry of Trade and Industry
453
The ad scored a total of forty-one (41) points. It can be classified as a semi drama clip. It starts
with a dramatic interplay of two actors and ends with an announcer who summarizes the main
idea. Eight (8) respondents said that the ad was funny; six (6) agreed that the ad was creative;
seven (7) added that it was informative; and six (6) concluded that the ad was believable. The
researchers can add that humour, creativity, believability and information were the key
influencers of the respondents’ choice of this ad as appealing. This finding supports a study by
Weinberger and Gulas (1992) which conclude that humour in advertisements can be appealing
to consumers because, being amused stimulates the brain in a positive way. Also using the
categorization by Catanescu and Tom (2001), it is observed that personification and sarcasm
were employed for the humorous effect. First of all, the names of the characters, “Kele and
Wele” being the name of a popular Ghanaian food makes them funny to some extent. The ad
also uses sarcasm as a means of lampooning those with an undying love for foreign made goods.
In the ad, Wele says, “right now our names are all over Ghana” and Kele replies, “as for me
they like me because the things I wear are from the Diaspora - Yankee”. The findings support
an earlier research that, originality/creativity of ads, is at the heart of advertising effectiveness,
because it captures consumers’ attention and make ads more memorable (Kotler et al. 2012;
Belch et al. 2009; De Pelsmacker et al. 2002). Discussing the marketing approach that reaches
out to consumers through an informative and rational message, Incardona and Poncibo (2007)
state that, in order to grab attention, it is important to be very selective and only communicate
the most essential information. And in this campaign, the most essential information (Buy
Made in Ghana goods) was clearly delivered through a humorous and memorable drama. A
vivid summary of the results can be found in appendix 1: table 10.
Kele and Wele campaign (Part 2) by the Ministry of Trade and Industry
This is a semi drama clip which scored forty-one (41) points. It is a dramatic interplay of three
(3) actors, ending with an announcer’s summary of the main idea. Eight (8) respondents agreed
that the ad was funny; six (6) concluded that it was creative; six (6) said it was informative;
and three (3) agreed that the ad was believable. Hence humour, creativity, and information
were the key influencers of respondents’ choice of this ad as appealing. The findings also
support a study by Weinberger and Gulas (1992) that posit that humour in advertisements can
be appealing to the consumers because, a feeling of amusement stimulates the brain in a
positive way. And using the categorization by Catanescu and Tom (2001), it is observed that
personification was employed for the humorous effect. Again, the names of the characters,
“Kele and Wele” being the name of a popular Ghanaian food makes them funny. A vivid
summary of the results can be found in appendix 1: table 11.
It’s your life it’s your choice campaign by the Ghana Health Service and USAID
454
This semi drama, involving four (4) actors scored forty (40) points. Two (2) respondents agreed
that the ad was creative; seven (7) believed it was informative; four (4) said it was believable;
one (1) also believed the ad was educative. However one (1) respondent added that the ad was
not creative; and one (1) also said it was not funny. Generally, it can be concluded that
‘informative/information’ was the major influencing factor of respondents’ choice of this ad as
appealing. Discussing the marketing approach that reaches out to consumers through an
informative and rational message, Incardona and Poncibo (2007) state that, in order to grab
attention, it is important to be very selective and only communicate the most essential
information. And in this ad, the most essential information (avoid unwanted pregnancy) was
clearly delivered through an informative drama. However, to some extent, believability and
creativity also contributed to respondent’s decision. A vivid summary of the results can be
Your partner for life campaign by Latex Foam Limited
Finally, this radio campaign by Latex Foam, which can be classified as a full jingle also scored
forty (40) points. Six (6) respondents said the ad was creative; two (2) agreed that it was
believable; three (3) point to its informative taglines; one (1) respondent also believed it was
“nice and very engaging”; one (1) said it was “catchy and nostalgic”; and one (1) also believed
it was great. However, one (1) respondent said it was not creative; and two (2) believed it was
not funny. Creativity was the major influencing factor for respondents’ choice of this ad as
appealing. A vivid summary of the results can be found in appendix 1: table 13.
Overall Summary of the Analysis
A synthesis of analysis of the radio campaigns which emerged as the most appealing is as
follows: six (6) of the radio clip fell under the semi drama category. These were the “drop that
yam” campaign by Tigo, scoring as high as forty-five (45) points; the “Bananas and groundnuts”
campaign by Roverman Productions, scoring forty-four (44) points; the “better service”
campaign by CDH Insurance, scoring forty-two (42) points; the two “Kele and Wele”
campaigns by Ministry of Trade and Industry, scoring forty-one (41) points each; and finally,
the “it’s your life it’s your choice” campaign by the Ghana Health Service and USAID, scoring
forty (40) points. Four (4) of them fell under the full jingle category. These are the “Nourishing
generations” campaign by Nestle Ideal Milk, scoring forty-four ( 44) points; the “we want to
grow with you” campaign by Beige Capital, scoring forty-one (41) points; the “creamy
goodness” campaign by Nestle Ideal Milk, scoring forty-one (41) points; and the “your partner
for life” campaign by Latex Foam, scoring forty (40) points. And finally, one ad, the “you first”
campaign, scoring forty (40) points, fell under the full monologue category.
455
Humour and creativity were the major influencing factors of the respondents’ choice of the six
(6) appealing radio ads which can be put under the semi drama category. Regarding the four
(4) jingles, creativity was the single major influencing factor of the respondents’ choice of these
jingles as appealing. In other words, most of the respondents were of the opinion that the jingles
were appealing because they are creative. This clearly supports earlier studies which have
concluded that originality/creativity of ads captures consumers’ attention and makes ads more
memorable (Kotler et al. 2011). Finally, the remaining ad campaign, the “you first” campaign
by the Universal Merchant Bank (UMB), scoring forty (40) points, can be put under the full
monologue category. Creativity and believability were the major influencing factors of the
respondents’ choice of this ad as appealing.
Generally, humour, creativity, believability and information/informative were key influencing

factors of the respondents’ choice of ad appeal. In addition to humour and creativity, two of
the variables or characteristics of ad appeal, posited by Kotler et al. (2011) that is, believability
and informative were supported by the findings. In a nutshell, the researchers can say that
creativity is the major determinant of a radio ad appeal. Radio ads which scored high on humour,
invariably scored high on creativity. This means that if a radio ad is humorous, it is seen as
creative as well. It is therefore better for advertisers and their ad agencies to concentrate more
on creativity to make their ads more appealing. A creative radio ad is different from the norm
and usually has an element of the unexpected.
One interesting revelation is that, drama and jingles have great tendencies of being appealing
to Ghanaian consumers. The experiment showed that, out of the eleven (11) radio ads which
emerged as the most appealing, six (6) can be put under the semi drama category. Another
interesting revelation is that, out of the six (6) appealing ads which fell under the semi drama
category, humour was the major influencing factor of respondents’ choice in four (4) of these
ads. As a matter of fact, humour was the major factor of respondents’ choice of the highest
scoring radio ad, ‘the drop that yam’ campaign by Tigo, as seen in appendix 1: table 3.
Conclusion and Implications for Future Review
Radio advertising is very popular in Ghana. Next to TV, a substantial amount of advertising
revenue is spent on radio. This study sought to categorize the various forms of radio ads in
Ghana, and determine which categories are appealing to Ghanaian consumers as well as their
unique characteristics. Furthermore, the study examined whether or not radio ads with
humorous content, appeal to Ghanaian consumers.
RQ1: What are the various radio ad formats or categories in Ghana?
456
Warner (2009) categorized radio commercials into five (5) categories and this categorization
is rather limiting. For instance, humour can be part of several different categories of ads. In the
same way, there can be different categories of drama and even jingles. After content analyzing
and coding, twelve (12) categories of radio ads in Ghana were determined. These are - Uni-
Announcer, Duo-Announcer, Full drama, Semi drama, Full Jingle, Semi Jingle, Phonelogue,
Full Dialogue, Semi Dialogue, Full Monologue, Semi Monologue and Medley. However, since
the coding or categorization was done by the researchers, there is no attempt to strictly
generalize these as the various categories of radio ads in Ghana. The limitation here is that the
categorization might have been more or less depending on other radio ads or the number of
researchers coding.
RQ2: Which radio ad format(s)/categories appeal(s) most to Ghanaian consumers?
After analyzing the data collected from two (2) days’ experimentation of the (100) radio
commercials, the ten (10) respondents’ responses affirm that radio ads in the drama (whether
full or semi), full jingle and monologue categories, have great tendencies of being appealing to
Ghanaian consumers.
However, most of the radio ads which emerged as appealing to respondents fell under the semi
drama category. Out of the eleven (11) radio ads which scored forty (40) points or more, six
(6) were semi drama, four (4) were Full jingles, and one (1) was a Full monologue. The highest
scoring radio ad (“drop that yam” campaign) is a semi drama clip. There is no attempt to
generalize this conclusion since a larger composition of respondents might give different
results. Again, if a representative sample of radio ads from each category was selected, the
results might have been different.
RQ3: Do radio ads with humorous content appeal to Ghanaian consumers?
The final conclusion of this study is that, radio ads with humorous content are very appealing
to Ghanaian consumers. Out of the six (6) semi drama radio ads, which emerged as appealing
to the respondents, five (5) of them had humorous content. Again, assessing the highest scoring
radio ad, (“drop that yam” campaign), all ten (10) respondents agreed that the ad was funny.
As a matter of fact, it was the only campaign in which all respondents agreed on one variable
(creativity). The final conclusion is that radio ads with humorous content are very appealing to
Ghanaian consumers.
This study can increase advertisers’ and their creative agencies’ understanding of the various
categories and what constitutes appealing radio ads to consumers in Ghana. Further research
can recode or categorize the radio ads with more people to affirm the trend in this research to
prove or disprove the twelve (12) categories defined. This will increase the inter-coder
457
reliability to facilitate generalization of the findings. Moreover, a more representative sample
of radio ads from each of the radio ad categories can be used in future studies. Finally, it would
also be very interesting for future researchers to test further to know the effects of ad appeal on
purchase intentions of Ghanaian consumers.
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Appendix 1: Tables
YEA RADIO TELEVISION PRINT OUTDOOR TOTAL (Ghc)

R
2013 205,108,413.6 456,656,891.7 535,257,58.0 142,653,211.0 857,944,274.3

2 4 0 0 6
2014 124,342,056.0 219,345,057.0 339,062,75.0 116,266,704.0 493,860,092.0

0 0 0 0 0
(Table 1: Ad spending expenditure in Ghana)
10 – 29 30 – 39 40+
Ad score/Rating Unappealing Neutral Appealing
Ad Numbers 16, 22, 23, 40, 43, 1, 2, 4, 5, 6, 8, 9, 10, 11, 12, 13, 3, 7, 29, 32, 35,
54, 55, 63, 66, 89, 14, 15, 17, 18, 19, 20, 21, 24, 50, 51, 72, 76, 77,
90, 99 25, 26, 27, 28, 30, 31, 33, 34, 78
36, 37, 38, 39, 41, 42, 44, 45,
46, 47, 48, 49, 52, 53, 56, 57,
58, 59, 60, 61, 62, 64, 65, 67,
68, 69, 70, 71, 73, 74, 75, 79,
460
80, 81, 82, 83, 84, 85, 86, 87,
88, 91, 92, 93, 94, 95, 96, 97,
98, 100
(Table 2: radio experiment results)
REMARKS Funny Creative Informative Believable
RESPONDENTS 10 8 5 5
TOTAL SCORE 45
(Table 3: ad assessment summary of the Tigo drop that yam campaign)
REMARKS Creativ Informativ Believabl Catchy Interestin Enjoyabl

e e e & g & e
nostalgi touching
c
RESPONDENT 7 4 4 1 1 1
S
TOTAL SCORE 44
(Table 4: ad assessment summary of the “nourishing generations” radio campaign by Nestle

Ideal Milk)
RESPONDENTS 6 6 5 6
TOTAL SCORE 42
(Table 5: ad assessment summary of the bananas and groundnuts radio campaign by Roverman)
REMARKS Creative Believable Informative Direct & Great

touching
RESPONDENTS 6 5 3 1 1
461
TOTAL SCORE 42
(Table 6: ad assessment summary of the You First radio campaign by UMB)
REMARKS Funny Creative Believable Informative True

experience
TOTAL SCORE 42
(Table 7: ad assessment summary of the better service campaign by CDH insurance)
REMARKS Creative Believable Informative Emotional
RESPONDENTS 7 3 2 1
TOTAL SCORE 41
(Table 8: ad assessment summary of the “we want to grow with you” campaign by Beige
capital)
REMARKS Creative Believable Informative Catchy Just ok
TOTAL SCORE 41
(Table 9: ad assessment summary of the creamy goodness Campaign by Nestle Ideal milk)
RESPONDENTS 8 6 7 6
TOTAL SCORE 41
(Table 10: ad assessment summary of Kele and Wele Campaign part 1 by Ministry of Trade)
462
RESPONDENTS 8 6 6 3
TOTAL SCORE 41
(Table 11: ad assessment summary of Kele and Wele Campaign part 2 by Ministry of Trade)
REMARKS Creativ Informativ Believabl Educative Not Not funny

e e e creative
RESPONDENTS 2 7 4 1 1 1
TOTAL SCORE 40
(Table 12: ad assessment summary of the Ghana health service and USAID campaign)
REMARKS Creativ Informativ Believabl Nice & Engaging Grea

e e e t
REMARKS Catchy & nostalgic Not creative Not funny
RESPONDENTS 1 1 1
TOTAL SCORE 40
(Table 13: ad assessment summary of your partner for life campaign by Latex foam)
463
Determinants of Customer Switching Behavior: Evidence from the
Non-Bank Financial Institutions (NBFIs) in Ghana
Ernest Yaw Tweneboah-Koduah

E-mail first author: etkoduah@ug.edu.gh
Victoria Mann & Daniel Quaye, University of Ghana Business School, Department of
Marketing and Entrepreneurship, Legon, Accra-Ghana.
Abstract
Due to the intensified competition in the financial sector as a result of homogenous products
and services, it is becoming increasingly important for service providers to take steps to retain
their customers. The paper sought to investigate the factors influencing NBFIs’ customer
switching behavior. Data collected from 400 respondents was analyzed using descriptive
statistics and multiple regression. The study found Excessive Pricing, Poor Service Quality,
Customer Dissatisfaction and Lack of Trust to have a statistically significant influence on
NBFIs’ customer switching behavior in Ghana.
Key Words: Determinants, Customer, Switching Behavior, Non-Bank, Financial Institutions,

Ghana
Introduction
The shift of marketing from transactional to relational in recent times demands that, service
organisations build long term profitable relationships with their customers in order to stay
competitive (Clemes et al. 2010). However, a serious threat to achieving a long term profitable
relationships with customers, is customer switching behavior (Narteh, 2013). Customer
switching, which is replacing the current service provider with another (Clemes et al. 2010),
comes as a result of a number of reasons including unfavourable pricing, customer
dissatisfaction, poor service quality, bad reputation/image, inconvenience and involuntary
switching among others (Karimii et al. 2012). Effah-Bediako et al. (2013), emphasize that when
a consumer switch from a product or service, though the consumer bears some sort of cost
464
(psychological, time or money), the biggest loser is the firm whose profit margins fall as a
result of decrease in sales. Other consequences associated with customer switching are
increased marketing cost in attracting new customers, negative word of mouth and loss of
future earnings (Roos and Gustafsson, 2007). It is therefore, more profitable for organizations
to have defensive strategies that strive to retain existing customers than attracting new
customers (Reichheld, 1996).
Customer switching behavior and the factors that contribute to this phenomenon has been
extensively researched across various industries (Effah-Bediako et al. 2013; Narteh, 2013;
Keaveney, 2001; Roos and Gustafsson, 2007; Keaveney, 1995). A lot of these existing studies
have concentrated on either banking sector or telecommunications sector (Narteh, 2013; Effah-
Bediako et al. 2013). The emergence of Non-Bank Financial Institutions/Intermediaries
(NBFIs) as one of the important sub-sectors in the financial system has largely contributed to
the socio-economic development. However their activities and hence the impact of customer
switching behavior on their activities is largely ignored. Empirically, the key determinants of
NBFI customer switching behavior have not been investigated adequately. Hence this study in
response to the paucity of research on customer switching behavior in the NBFIs, examined
the determinants of customer switching behavior in NBFIs in Ghana.
Contextual Background
Even though, Ghana has seen a boom in the financial market over the last two decades, over
70% of its population remains unbanked. The attempt to close this gap has seen the
proliferation of several NBFIs such as savings and loans companies leading to intensified
competition among these NBFIs (BOG Annual Report, 2007). NBFIs in Ghana are categorized
into insurance companies, mutual funds, credit unions, microfinance companies, susu
collectors and savings and loans companies (Narteh, 2013). The proliferation of these NBFIs,
especially savings and loans companies (SLC) have contributed enormously to economic
growth by encouraging savings attitude among majority of the unbanked population in Ghana
(Obuobi, 2012). However, the recent liquidation of most these NBFIs as a result of
mismanagement and payment of unsustainable interest on deposits have led to panic
withdrawals, massive switching of customers and general lack of trust in these companies
(CGAP, 2011).
Literature Review
It is evident that losing customers can have telling effects on organization’s market share and
profits margins (Reichheld, 1996; Keaveney, 1995). Bitner et al. (1990) argue that service firms
need to understand customer switching behavior from the relationship marketing perspective,
emphasizing that relationships that are of high value to customers may prevent likely customer
465
defections and improve the spreading of positive word of mouth. Bitner et al. (1990) identify
lack of alternatives, switching costs, inconvenience, unavailability of service, and unfavorable
prices as major contributing factors to behavioral intention to switch service providers. Again,
competition in the financial sector as well as the provision of homogenous products and
services makes the sector more prone to customer switching than ever before (Clemes et al.
2010). Consistently, extant literature evaluating the triggers of customer switching have
identified excessive pricing, customer dissatisfaction, poor service quality, poor
reputation/image, inconvenience, poor technology and lack of trust, perceived lack of value,
ineffective advertising, and switching costs as the key determinants of customer switching
behavior (Clemes et al. 2010, 2007; Levesque and McDougall, 1996; Effah-Bediako et al.
2013; Narteh, 2013).
Conceptual Framework and Hypotheses: The study adapted a framework based on a

combination of the factors or antecedents of customer switching behavior evaluated by
researchers in the banking sector and the services industry in general (Narteh, 2013; Clemes et
al. 2010; Gerrard and Cunningham, 2004; Colgate and Hedge, 2001; Keaveney, 1995).
Excessive Pricing: As a choice factor in buying situations, customers heavily rely on price in
the selection of alternatives and are very conscious of pricing whenever confronted with
purchase decisions (Clemes et al. 2010). In the financial services sector particularly banks,
Gerrard and Cunningham (2004) asserts that high price perception is more influential in
customer switching behavior than service failures. A study by Dawes (2004) also shows a
positive relationship between price increases and defection rates in banks. This study defines
excessive pricing as high loan processing and administration fees, high interest rates on loans
and high penalty charges for defaulting loan repayment. Based on the literature above, the
following hypothesis is formulated.
H1: NBFI customer switching behavior is positively influenced by excessive pricing
Poor Service Quality: Perception of poor service quality was found in literature to be another
key determinant of customer switching behavior (Effah-Bediako et al. 2013; Narteh, 2013;
Parasuraman et al. 1988). That is, customers’ propensity to switch is greater when services
delivered are below their expectations. Poor service quality was found to have a significant
impact on customer switching behavior in the banking sector (Dawes, 2004). On this premise,
the following hypothesis is formulated.
H2: NBFI customer switching behavior is positively influenced by poor service quality
466
Customer dissatisfaction: Which is unmet expectations of customers, was also found by Han
and Ryu (2009) as one of the key significant factors influencing customer switching behavior.
Based on this finding, the following hypothesis is formulated.
H3: NBFI customer switching behavior is positively influenced by customer dissatisfaction
Poor Reputation/ Image: Clemes et al. (2010), described reputation/image as a key

organizational asset that is valuable, distinctive, difficult to imitate and non-substitutable.
Positive reputation and image has been identified as a strategic tool used to earn above average
profits (Wang et al. 2003). Poor Reputation/ image has been proven by Clemes et al. (2010) to
have significant effect on customer switching behavior in the Chinese banking industry. This
study considers NBFI/SLC’s lack of trustworthiness, financial instability and lack of
commitment to customers as measures of poor reputation and image. The following hypothesis
is thus formulated.
H4: NBFI customer switching behavior is positively influenced by poor reputation/ image
Inconvenience: Colgate and Hedge (2001) have categorized inconvenience into geographical
and time. Geographical inconvenience is related to the location of the service provider while
time inconvenience is created as a result of longer queues, poor opening and closing hours,
long waits for appointments among others. For customers who prefer face to face delivery of
their banking services, Gerrard and Cunningham (2004) illustrates that geographical
inconvenience has a significant impact on their decision to stay or switch banks. Roos and
Gustafsson (2007) posits that irrespective of whether satisfaction rate are high or low,
convenient locations of banks encourage customers to stay with their banks and delay switching
to other banks. Gerrard and Cunningham (2004) investigated the bank switching behavior of
Singapore graduates and found that inconvenient location has an impact on those graduates
who prefer face-to-face communication. From the evidence above, the following hypothesis is
developed.
H5: NBFI customer switching behavior is positively influenced by inconvenience
Poor Technology: The extent to which financial services are delivered through technology such
as ATMS can affect consumer evaluations of service quality and customer satisfaction and
consequently their behavior to stay or switch (Wang et al. 2003). It has however, been
concluded that, less innovative banks that offer poor technologically aided services have their
customers switching to other banks that adopts technology in service delivery (Nartey, 2013).
The following hypothesis is formulated based on the literature above.
H6: NBFI customer switching behavior is positively influenced by poor technology

467
Lack of Trust: Regarding trust, Selnes (1998) posits that trust is a well-considered process built
on the ability of both parties in a relationship to continually act out their obligations to each
other for the sustainability of the relationship. A study by Karimii et al. (2012) found that
establishment of trust between an organization and their customers enhances customer
retention, hence mitigating customer switching behavior. Thus, lack of trust is revealed to have
a significant impact on customer switching behavior. In relation to the above, the following
hypothesis is developed.
H7: NBFI customer switching behavior is positively influenced by lack of true
Figure 1. Conceptual Framework
Excessive pricing
Poor service quality H11

11
Customer Dissatisfaction H2
H3
Poor Reputation/Image
H4
NBFI Customer Switching Behavior
Inconvenience H5
Poor Technology H6
H7
Lack of Trust
Research Methods
A descriptive quantitative research design that utilized a cross-sectional survey was adopted in
the data collection process of the study Creswell (2009). Crouch (1984) recommends that
minimum sample sizes for quantitative consumer surveys are of the order of 300 to 500
respondents. On this basis, a sample size of 450 customers was conveniently selected from ten
(10) Savings and Loans Companies (SLCs) in Ghana. The ten SLCs were selected based on a
ranking provided by the Bank of Ghana. These SLCs were the top ten of the twenty seven (27)
468
companies. 45 customers were conveniently selected from each of the ten (10) SLCs. The
respondents were intercepted at the various exit points of the selected SLCs’ branches and the
questionnaires were administered and collected immediately upon completion. The
questionnaire was developed based on the research objectives and literature reviewed. Since
the eligibility criteria was people who have ever switched their service providers, the
respondents were first asked if they have ever changed their providers and those who answered
yes, qualified to be part of the survey. A total of 46 questions were anchored on a five point
Likert rating scale descriptors ranging from 1 (strongly disagree) to 5 (strongly agree).
Excessive pricing was measured using five items, poor service quality was measured with
thirteen items, customer dissatisfaction, poor reputation/image and lack of trust were measured
with 3 items whilst inconvenience, poor technology and switching behavior were measured
using four items respectively on the five-point Likert scale.
A pre-test was conducted from a random sample of 20 customers from the 10 SLCs aged 18
years and above to assess the reliability, ambiguity and validity of the questionnaires (Cooper
& Schindler, 2006). The pre-testing further clarified the questions for better understanding.
Due to incomplete data, 400 questionnaires were used for the final analysis. Data was analyzed
using descriptive statistics, exploratory factor analysis and multiple regression.
Analysis of findings
The results revealed that 55.0% of the respondents were females with majority of them 81.7%
having ages ranging from 25-55 years. 31% were diploma holders, 30.5% were undergraduate
and postgraduate holders respectively and 38.5% were high school holders or below. Majority
of the respondents 65.1% were traders. This could be explained by the fact that in Ghana,
majority of people who patronize these SLCs are traders. An examination of how long these
customers dealt with their previous service providers revealed that more than half of the
respondents 56.8% were engaged with their former service providers for less than five years
prior to switching; 30.8% had done business with their former service providers between 5-10
years with only 6.8% who had done business with their SLC for 11-15 years.
Factor Analysis: Factor analysis was conducted to identify variables (components) that account
for as much variation in the original variables as possible (Pallant, 2003). Bartlett test of
Sphericity (Approx. Chi-square= 5271.426, df. 741, sig. 0.000) and the KMO measure of
sampling adequacy (Value of .917) indicated a significant correlation among the variables to
merit the application of exploratory factor analysis (Malhotra & Birks, 2006). Only variables
whose Eigen values were equal or greater than 1 were selected (Malhotra & Birks, 2006). In
addition, variables with loadings of at least 0.5 and factors with a reliability threshold of 0.7
(Hair et al. 2006) were selected for the analysis. The variables measuring the factors were found
to explain altogether a satisfactory 62.313% of the total variance.
469
Reliability of the exploratory factor analysis (EFA) and re-specification of factors
Cronbach’s alpha coefficient was employed to check the reliability of the scales used for this
survey (Hair et al. 2006). Only factors that met the minimum value of 0.6 were accepted. Thus,
in all, thirty (32) out of the original thirty-five (35) variables became valid for exploratory
factor analysis.
Reliability of the dependent variable: The reliability of the scales used for the dependent
variable were also assessed and found to be appropriate. Four out of the five variables had high
loadings and loaded perfectly on the dependent variable with a very excellent Cronbach’s alpha
of .903. The results have been summarized in Table 2 below.
Table 2: Reliability of scales for dependent variable
Variables Loadings No. of Cronbach’s

Items alpha
Customer Switching Behavior 4 .903
I was not happy with my previous SLC. .826
I will not recommend my former SLC to other .814

people.
I will not patronize any products and services offered .798

by my former SLC
Overall, I was not satisfied with my former SLC .796
Multiple Regressions
A multiple regression analysis was performed to test and validate the hypotheses of the study.
Table 3 below presents a summary of the multiple regression least squares results for the
dependent and independent variables:
470
Table 3: Multiple Regression Analysis Results
471
S.E Β T Sig.
(Constant)a .185 3.782 .002
Excessive Pricing .052 .301 4.213 .000*
Customer Dissatisfaction .049 .145 1.049 .000*
Poor Service Quality .046 .251 3.781 .003*
Poor Reputation/Image .054 .043 0.845 .314
Inconvenience .051 .042 0.763 .148
Poor Technology .048 .019 0.984 .068
Lack of Trust .046 .234 2.119 .001*
R .743 S.E of .26323

estimate
R-Square .698 F-statistics 125.843
Adj. R-Square .673 Prob. .000

(F.stats.)
Dependent variable: Customer Switching Behavior
From the regression table above, the results confirms a strong and significant relationship
between Customer Switching Behavior and its determinants (F = 125.843, Prob. F-stats <0.05).
The model explains 69.8% of the variance in customer switching behavior, an important
indication of the relevance of the model. Individual results, proved that excessive pricing (β
=0.301, t=4.213, p=0.000, < 0.05) and poor service quality (β =0.251, t=3.781, p=0.003, <
0.05) have the greatest influence on the respondents’ switching behavior, which is an indicating
that price related issues such as interest on savings, loans and administrative costs as well as
customer dissatisfaction were the major factors which caused most of the customers to switch
from their former SLCs. The third determinant of switching was Lack of Trust (β =0.234,
t=2.119, p=0.001, < 0.05). This also gives an indication that the sampled respondents to a large
472
extent, had trust issues with their former SLCs which led to their switching. Also most of these
customers had fears of their former SLCs running away with their monies (an experience which
had been witnessed by the Pyram Savings and Loans Company and DKM Micro-Finance).
Finally, poor service quality (β =0.145, t=1.409, p=0.003, <0.05) was found to be positively
and significantly impacting on customer switching behavior in the current study.
The remaining three factors namely Poor Technology (β =0.019, t=0.984, p=0.068, > 0.05),
Poor Image/Reputation (β =0.043, t=0.845, p=0.314,>0.05), and Inconvenience (β =0.042,
t=0.763, p=0.068, > 0.05) though were positively related to customer switching behavior
(judging from their beta values), they were statistically insignificant. This means that the
customers agree to the fact that poor image of SLCs, poor technology employed as well as the
inconvenience issues could cause NBFI customer switching, but they were not the main reasons
why the sampled customers switched from their former SLCs. Thus from the current study,
four out of the seven proposed hypotheses were accepted.
Discussion of Findings
This study was situated within the context of the paucity of research on NBFI customer
switching behavior in developing countries, specifically Ghana. The study identified four key
determinants of customer switching behavior in the Non-Bank Financial environment
including excessive pricing, customer dissatisfaction, lack of trust, and poor service quality.
This finding confirm previous studies (Narteh, 2013; Clemes et al. 2010; Keaveney, 1995)
which postulate that customer switching behavior can be attributed to multiple factors.
Excessive pricing and dissatisfaction were rated by the respondents as the most influential
factors that determine NBFIs customer switching behavior. Excessive pricing was defined in
this study as high interest rates on loans and low interest rates on savings as well as high
administrative fee for loan processing. These rates are normally tied with the prime rates
periodically established by the regulatory body Bank of Ghana but a cursory assessment of the
pricing system in NBFIs revealed that the interest rates paid on credits are often over and above
the approved rates and interest rates paid on savings accounts by the NBFIs are very low. This
is supported by Mensah (1997) who states that interest rates in Ghana is one of the highest in
the African sub-region making it very expensive for individuals and organizations accessing
credit facilities for business. This is also consistent with empirical studies carried out in the
Ghanaian retail bank customer switching by (Narteh, 2013).
Lack of trust in the ability of the provider to deliver on its promise or ability to safeguard
deposits was also identified as one of the strong determining factors influencing NBFIs’
customer switching behavior. Karimii et al. (2012) also found lack of trust as one of the factors
that contribute to bank customer switching in Asia.
473
In agreement with the empirical studies undertaken by Han and Ryu (2009), this study confirms
that negative perceptions of the quality of service delivered was negatively related to NBFI
customer switching behavior and the vice versa. That is, there is high propensity that customers
will switch if the services delivered to them do not meet their expectations. On the other hand,
the three other determinants: poor reputation/image, poor technology and inconvenience
though had a positive relationship; have no significant influence on customer switching
behavior in the NBFI sector. In other words, these factors are not of much importance to
customers who are mostly small business operators or traders in need of credit facilities. Once
they get solution to their financial needs, they care less about whether these NBFIs have poor
or good reputation/image. Although inconvenient location of banks have been identified as
having significant impact on bank customer switching behavior (Gerrard and Cunningham,
2004; Colgate & Hedge, 2001), the current study disconfirms that inconvenience (operating
hours, number of branches, branch accessibility and branch network) influences NBFI
customer switching behavior. This could be explained by the fact that employees of these SLCs
directly go to these traders and collect their deposits on daily basis and again, customers who
need the services of the NBFIs will search for them regardless of their location. The results on
poor technology is also inconsistent with findings from Narteh (2013) who revealed that lack
of technological products such as ATMs, internet and telephone banking in retail banks in
Ghana triggered bank customers to switch to alternative providers who are technologically
innovative. This is because most of these NBFI clients are not technologically inclined to
demand technologically aided products/services including common ones such as ATMs. It also
emphasizes the point that majority of NBFI customers emerges from the illiterate groups of
Ghanaians who though forms the majority of the informal sector of Ghana, are not enthused
about technology.
Recommendations and future research
Based on the findings of the study, it is recommended that managers of NBFIs develop
competitive pricing strategies that are markedly different from other mainstream banks in order
to retain customers and stay competitive. Several studies emphasize that, excellent service
quality aid customer retention, enhances corporate image, facilitates positive word of mouth,
increases profitability and serves as a barrier to switching behavior (Yoon and Suh, 2003;
Cronin et al. 2000). The study reechoes these findings by revealing that poor service quality
influences NBFIs customer switching behavior. Thus, management of NBFIs should focus on
improving the service quality dimensions of reliability, assurance, tangibility, empathy and
responsiveness in their service delivery efforts. As one of the factors found to have influence
on NBFI customer switching behavior in Ghana, it is recommended that management strive to
develop and enhance customer satisfaction strategies that focus on providing desired-service
levels to NBFI customers. According to Roos and Gustafsson, (2007) trust is built on the
confidence, reliability and integrity of exchange partners in terms of qualities such as
474
consistency, competency, honesty, responsibility and fairness. NBFI practitioners should
therefore look beyond improving service quality and customer satisfaction levels and develop
strategies that enhance trust to ensure economically viable and long-term relationship with
customers.
Poor reputation/image, inconvenience and technology were found not to be significant

influencers of NBFIs’ customer switching behavior. It is recommended that managers should
not focus much of their resources and attention on these factors. The study is limited to Savings
and Loans Companies in Accra and this may affect the generalizability of the findings to all
NBFIs in Ghana. We therefore, recommend that, the study be replicated in other Non-Bank
Financial Institutions such as the Insurance and Micro Finance institutions in Ghana and other
parts of the country. Future researchers may also adopt a qualitative research methodology to
have in-depth understanding of NBFIs customer switching behavior.
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Understanding Consumers’ Behaviour Towards Online Shopping: A Study

of Online Shoppers in Anambra State, Nigeria
477
Ifeanyichukwu C.D
Nnamdi Azikiwe University Awka
cd.ifeanyichukwu@unizik.edu.ng
Prof. I.C Nwaizugbo

ic.nwaizugbo@unizik.edu.ng
Dr Steve Ukenna, Godfrey

Okoye University Enugu
steveukenna@yahoo.com
O.C Ojiaku
ohbeena@gmail.com
Abstract
This study centers on Consumers’ Behaviour towards Online Shopping in Anambra state.
Online shopping is still a new and emerging area of business management and information
technology. Presently, increasing number of Nigerians are shopping online, but it is not clear
what drives them to shop in this way, thus, the major problem of this study. The objective
sought to examine the relationship between perceived outcome, shopping orientations,
shopping motivations, normative beliefs, and past experience on online shopping. 323 online
shoppers in Anambra State were selected conveniently as respondents to elicit the required
information using structured questionnaire. Multiple Regression was used to test the
hypotheses. Result revealed that normative beliefs, and past experience has significant effect
on online shopping while perceived outcome, shopping orientations and shopping motivations
were seen to have no significant effect. The researcher recommended that e-stores should offer
superior values to shoppers. Also, strategies should be put in place to further increase access to
the internet and draw investments into the telecommunications industry to not only fuel the
success of e-commerce but also to boost the Nigerian economy.
Keywords: Online shopping, consumer Behaviour, Perceived Outcome, Shopping Orientation,

Shopping Motivation, normative beliefs, past experience.
Introduction
478
It has been more than a decade since business-to-consumer electronic commerce (e-commerce)
first evolved. Even today, electronic commerce remains a relatively new emerging and
constantly changing area of business management and information technology. E-commerce
involves all financial and informational electronically mediated exchanges between an
organization and its external stakeholders. It also involves sharing business information,
maintaining business relationships and conducting business transactions by means of
telecommunication network. Recently, electronic commerce has been redefined by the
dynamics of the internet and traditional e-commerce rapidly moving to the internet. E-
commerce is said to be an essential characteristics of the internet era and an irreplaceable
marketing channel in business transactions (Chen, 2009).
The internet is an open World Wide communication network linking countless number of
computer networks throughout the world. Also, it has developed into a vast global market place
for the exchange of goods and services. In many developed countries, the internet has been
adopted as an important medium, offering a wide assortment of products with 24 hour
availability and wide area coverage. An increasing number of firms and organizations are
exploiting and creating business opportunities on the internet. With the advent of the internet,
the term e-commerce began to include : electronic trading of physical goods, and intangibles
such as information and all the steps involved in trade such as online marketing, ordering,
payment and support for delivery, the electronic provision of services such as after sales
support and online legal advice (Liang and Lai, 2000). The wide range of business activities
related to e-commerce brought about a range of new terms and phrases to describe the internet
phenomenon. These include i-commerce (internet commerce), e-retailing, virtual stores, cyber
stores, e-shop, e-store etc. Today, the internet has captivated the attention of retail marketers.
The internet as a retail outlet is moving from its infancy used by only a few to a market with
significant potential.
Nigeria is the fastest growing telecommunication country in Africa (Ayo, Adewoye, and Oni,
2007). The growth of a number of internet users from year 2000 to 2010 is sporadic as it
recorded 21.891.1% growth rate! According to the Internet Live Stats (2010), there were
200,000 internet users in Nigeria in year 2000. This number is however less than 1% of the
national population (precise 0.1%). In year 2006, the number has grown to 5,000,000 (again
just 3.1% of the national population). This figure doubled in 2008 with 10 million people
having access to the internet. In 2009, the figure went above double as 23,982,000 million
people used the internet in Nigeria. By June 2010; the number of internet users has grown to
43,982,200 that is, 29.5% of the country’s population. The increasing users of internet in
Nigeria from 0.1% in 2000 to 29.5% of its population in June 2010, revealed that the use of the
internet in the country is growing at a sporadic rate and still has the potential to grow higher
(Ayo, Adewoye and Oni, 2011).
479
Online shopping is becoming quite popular in Nigeria, due to its relative convenience and the
reasonable prices of goods and services available online. In 2012, expenditures in online stores
increased from #50 billion in 2010 to #378 billion in Nigeria (Philips Consulting, 2014). The
growth of the online shopping sector is directly linked to internet penetration and the number
of internet users has also grown globally and Nigeria is no exception. Online shopping offers
various benefits for the retailer- expanded geographical reach, lower cost and complete range
of product. Nevertheless, challenges like low internet penetration rate in Nigeria as when
compared to other developing/developed countries, security concerns associated with financial
and personal data etc. still abound. Online shopping is basically a process of buying and selling
of goods and services on World Wide Web (Forsythe and Shi, 2003). Internet shopping is fast
growing in Nigeria and major online shopping mall includes Jumia.com, Konga.com,
Taafoo.com, Slothlimited.com, Kaymu.com etc. This study will also consider free classified
advert sites like OLX.com.ng, price comparison sites like price check.com.ng, coupon selling
sites like dealdey.com as online stores. Online shopping behaviour (also called online buying
behaviour) refers to the process of purchasing products or services via the internet (Liang and
Lai, 2000) and Online shopping attitude refers to consumers’ psychological state in terms of
making purchases on the internet (Li and Zhang, 2002). Consumer behaviour as regards
shopping online describes the processes involved when individuals or groups select, purchase,
use or dispose products, services, ideas or experience to satisfy needs and wants (Solomon,
2010). This process is similar to the traditional shopping behaviour. This study therefore seeks
to know consumers’ behaviour towards online shopping in Anambra State.
Theoretical and Empirical Literature Review
Online Shopping
This is a component of shopping but involves buying and selling on World Wide Web. Online
shopping is basically a process of selling and buying of goods and services on World Wide
Web. Internet shopping has become the fastest growing as regards to use of the internet and
most online consumers use information gathered online to make purchases off-line (Dave,
Chadwick, Johnston & Mayer, 2006). Online shopping evokes buying products and services
from a bricks-and mortar retailer or shopping centre and the process is called business-to-
consumer (B2C) online shopping. Geissler and Zinkhan (1998) claimed that the internet shifted
the balance of power in favour of consumer as it became very easy for them to make shopping
comparison and evaluate alternatives without being pressured by sales people. The internet
makes life simple and innovation. People are doing business online and trade has become more
easy and fast due to this. Internet provides new ways to promote business. Website becomes
the essence of online business as to show their services and products. Internet gathers all
competitors and consumers in one place. It brings new lane to promote, advertise products and
services in market.
480
However, despite these advantages, disadvantages still abound. Consumers develop low trust
and perceive elevated risk of due to lack of face-to face communication (Xiao and Benbasat,
2007). Online consumers are always seeking new products, new attractiveness and the most
important thing being price compatibility with their budget. The internet is the best way to save
time and money though purchasing online within their range of budget at home or anywhere.
Consumers’ Behaviour Towards Online Shopping
Perceived Outcome
Perceived outcome refers to the perception of possible outcomes (positive or negative) of

certain behaviour (Limayem, 2000). It can also be considered as a cognitive behavioural belief
similar to the subjective probability that the behaviour will produce a given outcome (Ajzen,
1991). The risks associated with online shopping includes security risks, credit card risks,
privacy risks etc. Online shopping brings benefits to consumers in terms of convenience, time
saving, searchability and product information. Perceived outcome in online shopping refers to
both potential benefits of a shopping and risks associated with online shopping (Zhou, Dai and
Zhang, 2007). Therefore it was hypothesized that;
H1: There is a significant relationship between perceived outcome and online shopping.
Shopping Orientation
Shopping orientation was seen to have a significant impact on online shopping (Donthu and
Garcia, 1999; Korgaonkar and Wolin, 1999; Li and Russel, 1999). As a shopping behaviour
measure, shopping orientations are intended to capture the motivations of shoppers and the
desired experiences and goals they seek when completing their shopping activities (Stone,
1954). Shopping orientations have been seen to be a reliable predictor of consumer patronage
behaviour in retail formats such as catalog and mall shopping. Therefore it is expected that the
study of shopping orientations can help retailers identify and understand those consumers who
prefer to shop online.
Stone (1954) proposed the idea that shoppers can be classified based on their approach to
shopping activities. He identified four types of shoppers-economic, personality, ethical and
apathetic.
Economic shoppers would attempt to maximize their returns by carefully evaluating price,
quality and value. This type of shoppers spends a considerable amount of time collecting
information about the alternatives before making a purchase decision.
481
The personalizing shoppers build close relationship with the store personnel and make
purchases close to home. For shoppers under this category, shopping at stores where they
interact with salespeople and clerks on a personal level is important.
Ethical shoppers shop at stores in their immediate environment/neighbourhood with the

objective of keeping the money within the community in order to perceive and build his
community. He feels obligated to patronize local stores.
Apathetic shopper disdains shopping and would try and find ways to minimize the effect
involved in completing a shopping activity.
In addition to the above orientations, other classifications for shoppers have been suggested.
Bellenger and Korganonkar (1980) identified a socializing shopper as someone who views
shopping as a social activity. Hence it was hypothesized that;
H2: Shopping orientation will have a significant effect on online shopping
Shopping Motivations
In the Technology Acceptance Model (TAM), the pre-assumed usefulness of an information

system is to enhance job performance (Davis 1986). This emphasizes the pure utilitarian
motivation for using a system. Shopping motivation answers the question “why do people
shop?” (Tauber, 1972). Motivation is the driving force within individuals that force them into
action (Schiffman and Kanuk, 2010). It is important to gain insights into shopping
motives(Ratneshwar, David and Cynthia, 2000). These shopping motives includes:
Consumer shopping value is seen as the relationship between product and service quality and
the price paid for the product (May, 1989). Michon and Chebat (2004) define shopping value
as the aggregate gains that online shoppers obtain from a shopping trip and the degree of
satisfaction with that experience. Zeithmal (1988) defines value as “what I get for what I give”.
Hedonic Shopping Value poises that peoples motives for shopping are a function of many
variables, some of which are unrelated to the actual buying of products (Tauber, 1972). This
means that an understanding of shopping motives require the consideration of satisfaction
which shopping activities provide, as well as the utility obtained from the merchandise that
may be purchased. Hedonic shopping predictors refers to aspects of consumer behaviours that
relate to multisensory, fantasy and emotive aspects of consumption (Hirschman and Holbrook,
1982). This is to say, “people buy to shop and not shop to buy” (Babin, Darden and Graffin,
1994). Hedonic shoppers are intrinsically motivated towards shopping (Teller, Reutterer and
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Schnedlitz, 2008). For this group of shoppers, seeing, hearing, smelling and touching various
products provide sensual enjoyment (Underhill, 1999)
Utilitarian shopping value approximates the classical economic model of consumer behaviour
and depicts the buyer as a problem solver, rational and task-oriented (Babin, Dardin and Griffin,
1994). Utilitarian shoppers are extrinsically motivated and look for shopping experience and
convenience that make their life more enjoyable and easier (Kin, 2002). For this group of
shoppers, shopping is a work. Thus, it is hypothesized that:
H3: Shopping motivation will have a significant effect on online shopping.
Normative Beliefs
Normative beliefs are individuals beliefs about the extent to which other people who are
important to them think they should or should not perform particular behaviours. Subjective
norm or a predictor of intention to behave which in turn is a predictor of actual behaviour
(Ajzen, 1991). Normative belief, according to Tsai (2009) reflects the pressure perceived by
individuals to perform or not to perform a behaviour in relation to those persons or
organizations important to them. Emphasis on social pressure becomes relevant when it comes
to customers doing something for the first time or something that is not in their specialty.
Subjective norms capture the consumers perceptions of the influence of significant others
(family, peers, authority figures and media). It is related to intention because people often act
based on their perception of what others think they should be doing (Khan and Chavan, 2015).
Therefore, the guiding hypothesis for this construct is:
H4: Normative Belief will have a significant relationship on online shopping.
Past Experience
The influence of past experience on consumers behaviour towards online shopping is an issue
which has drawn much attention. Past research has found that online shopper with more internet
related experience perceive less financial risk than those with less online experience (Miyazaki
and Fernandez, 2001).
Studies have found that previous experience via a given shopping channel is negatively related
to perceived risks associated with future purchase in that online shopping context, consumers
who had positive experiences with online shopping, perceived more benefits and are willing to
continue shopping online while those with negative experience tend to neglect and speak ill of
online stores. Ranganathan and Jha (2007) found that past online purchasing experience has a
483
strong correlation with intention to purchase online. Knowing how past experience of buyers
could affect purchasing behaviour is important for the developer of e-commerce application.
Past experience with online shopping is found to correlate positively with consumers likelihood
to shop online. The more experienced consumers are with past online transaction experiences,
the higher their purchases amounts and the more likely they are to be repeat purchasers and the
lower likelihood of them aborting intended online transaction (Cho, 2014). These findings are
supported by the extended technology Acceptance model which suggests that increased user
experience has positive effect on users’ attitudes towards technology and the mastering of that
technology (Venkatesh and Morris, 2000). Good experiences with returning items leads to
repeat customers and recommendations for the retailer, while the bad experiences highlight
hassles and the extra cost required. Therefore it was hypothesized that;
H5: Past experience will have a significant effect on online shopping.
Fig 1 Composite Research Model

Perceived Outcome
online
Shopping Orientation shopping
Shopping Motivation
Normative Belief
Past experience
Source: Researchers’ own conceptualization
Methodology
The research design adopted in this study is survey. The population of this study comprises
online shoppers in Anambra State. Thus, the population of this study is unknown (infinite)
since the researcher cannot ascertain the number of online shoppers in Anambra State. This
study employed convenience sampling technique. This study made use of both primary and
secondary data. Structured questionnaire was the major instrument for data collection. A
total of 323 copies of questionnaire were distributed out of which 311 copies were returned as
correctly filled and usable. The data collected was analyzed using descriptive and inferential
statistics. Multiple regression was used to test for the significance of five hypotheses generated
for the study.
Data presentation and Discussion of Findings

484
Table 1 Respondents’ Demographic Characteristics
Variable Description Frequency Valid Cumulative Mean Standard

Percentage Percentage Deviation
Gender Male 135 43.4 43.4
Female 176 56.6 100 1.57 0.496
Total 311 100
Age 18 - 30 years 261 83.9 83.9
30 - 40 years 50 16.1 100 1.16 0.368
Total 311 100
Educational FSLC 2 0.6 0.6

Qualification
WAEC 94 30.2 30.9 3.29 1.026
OND/NCE 57 18.3 49.2
B.Sc 127 40.8 90.0
Postgraduate 31 10.0 100.0
Total 311 100
Marital Status Single 255 82.0 82.0
Married 56 18.0 100 1.18 0.385
Total 311 100
Source: Primary data,2015
Table 1 above shows that majority of the respondents are female with a frequency of 176
(56.6%) while male constituted a frequency of 135 (43.4%) with a mean and standard deviation
of 1.57 and 0.496 respectively. 83.9% of the respondents were between the ages of 18-30 years
totaling 83.9% while the remaining 50 respondents (16.1%) fall between the ages of 30-40
485
years. The mean and standard deviation of the ages are 1.16 and 0.368 respectively. 0.6% of
the respondents were holders of FSLC, 30.2% were WAEC holders, OND/NCE holders were
18.3%, B.Sc holders were 40.8% while the Postgraduate holders were 10.0%. The mean and
standard deviation of the educational qualifications of the respondents are 3.29 and 1.026
respectively. A large number of the respondents (255) with a percentage of 82.0% are single
while 56 respondents (18.0%) are married. The mean and standard deviation of the responses
are 1.18 and 0.385 respectively.
Table 2: Responses for how often Respondents shop online and the major internet store used
Variable Description Frequency Percent Mean Standard

Deviation
How often do you shop Frequently 122 39.2 1.75 0.684

online
Very often 43 13.8
Less often 146 46.9
Total 311 100
Which of these e-stores Konga 80 25.7 2.19 1.086

have you used
Jumia 150 48.2
OLX 44 14.1
Price Check 16 5.1
Others: 21 6.8
Dressrite
Kaymu etc
Total
311 100
Source: Primary data, 2015
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Table 2 above shows that 122 (39.2%) of the respondents shop online frequently. 43 (13.81%)
shop online very often and 146 (46.9%) shop online les often. The mean and standard deviation
of these scores are 1.75 and 0.684 respectively. Also, 80 (25.7%) of the respondents shop on
Konga, 150 (48.2%) shop on Jumia, 44 (14.1%) shop on OLX, 16 (5.1%) visit Price Check and
only 21 (6.8%) shop on other sites like Dressrite, Kaymu etc.
Hypothesis Testing
Table 3 below shows the Beta coefficients which gives the contribution of each independent
variable to the model while t-values and p-values revealed the effect of the variable and the
critical ratio and the p-values respectively.
Table 3 Coefficients a
Model Unstandardizied coefficients Standardized

Coefficients
Beta
B Std. Error T Sig
1 (Constant) 4.094 .420 9.759 .000
Perceived outcome -.085 .070 -.065 -1.215 .225
Shopping orientation .117 .050 .128 2.330 .020
Shopping motivation .016 .053 .018 .310 .757
Normative believe .211 .057 .218 3.689 .000
Past experience -.386 .070 -.314 -5.521 .000
Source: SPSS version 20
Dependent Variable: Online shopping
From Table 3 above, perceived outcome is 0.225, which is greater than 0.05, therefore the
hypothesis is rejected and it is concluded that there is no significant relationship between
perceived outcome and online shopping. Similarly, shopping orientation is 0.020, which is
greater than 0.05, therefore the hypothesis is rejected and it is concluded that there is no
487
significant relationship between shopping orientation and online shopping. Shopping
Motivation (.757) is also greater than (0.05), and the hypothesis is rejected. It is concluded that
there is no significant relationship between shopping Motivation and Online Shopping.
Normative Belief scored (.000) which is less than (0.05), therefore the normative belief
hypothesis is accepted and it is concluded that there is a significant relationship between
normative belief and online shopping. In the same line, Past Experience scored (.000), which
is less than (0.05), and hypothesis of past experience is accepted and it is concluded that there
is a significant relationship between past experience and online Shopping.
Conclusions and Implications
Perceived outcome, Shopping Orientations and Shopping Motivations have no significant

relationship with online shopping. This means that online shoppers are not moved by feelings,
fun and excitement. In addition, online consumers/shoppers in Anambra are not interested in
the potential benefits and risks involved in online shopping. However, normative belief has a
significant relationship with online shopping. This implies that online shoppers listen to the
opinion of their friends, family and relatives and most of the times shop online to belong to the
group of their friends who do so. The findings also revealed that past experience has a
significant relationship with online shopping. The findings implies that consumers who
continue shopping online have tried it once and enjoyed the process entirely. Thus, they
continue.
The following recommendations are therefore made. Internet stores also should improve their
e-WOM (i.e e-Word of mouth). This is because online shoppers more often listen to their
family, friends and relations before shopping online. Online shoppers first/past experience with
the e-stores to a large extent determine if they will continue with the act of internet shopping
or switch to the conventional brick-and-mortar shopping. Therefore, e-stores should make this
experience worthwhile for the online shoppers to ensure repeat e-purchase. Nevertheless, since
online shoppers in Anambra state do not consider the benefits and risks involved in online
shopping before going into it then e-stores should place less emphasis on the perceived benefits
to be derived from online/shopping. More so, e-stores should enlighten Anambra online
shoppers on possible benefits to be derived from shopping online like convenience, time saving
and so on. This can also serve as an added benefit. Strategies must be put in place to further
increase access to the internet and draw investments into the telecommunications industry to
not only fuel the success of e-commerce but also to boost the Nigerian economy. Online stores
must be persistent in their efforts to create effective and relevant advertising campaigns about
online shopping that appeal to Anambra populace and Nigerians as a whole. E-stores should
seek new ways of delivering superior value to online shoppers.
488
Furthermore, this study is limited to the effect of consumer behavior on online shopping. Its
effect on other internet activities like web browsing, emailing etc was not included. Further
studies can incorporate internet activities as a whole so as to make it more elaborate. Finally,
care must be taken in adopting the findings of this study. Further studies should include more
variables of consumer behavior to see its effect on online shopping or internet activities as a
whole.
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South African Consumer Sentiment Towards Marketing
Thérèse Roux
Tshwane University of Technology
rouxat@tut.ac.za
Italo Trevisan
Università di Trento
italo.trevisan@unitn.it
Enrico Libralato
Università di Trento
enrico.libralato@studenti.unitn.it
Abstract
The purpose of this research is to determine the South African index of sentiment towards
marketing (ICSM), both in South Africa as a whole and for the different ethnic groups making
up its population. Such sentiments toward marketing practices are core indicators of the
marketing system’s performance and provide valuable information to international marketing
managers to select markets and to fine tune to the local perceptions about their marketing
policies. The data for this research were collected via personal interview administrated surveys
with 727 respondents across seven administrative regions in the Tshwane metropolitan area of
South Africa. The finding reported in this paper for the South African sample as a whole,
revealed that South African consumers seem to be more positive toward marketing practices in
comparison to the other developed and developing countries belonging to transition economies.
Furthermore slight positive and almost similar sentiments towards three of four dimensions
were revealed, with the negative sentiment towards retail being an exception
INTRODUCTION
Attitudes and perceptions are crucial to the consumers’ decision-making in the purchasing
process. Perception is defined in Chamber’s Dictionary as “the combining of sensations into a
recognition of an object”). It is the process through which people select, organise and
interpreter the information contained in the stimuli they receive, in order to obtain a meaningful
delineation of reality. Attitude is the disposition of a person to react favourably or unfavourably
to actions, events and objects or types of objects (Kerin et al. 2010:148, 151). Among the most
crucial tasks of marketing, is the shaping of consumer perceptions in such a way that they will
develop a favourable attitude towards the products or services the firm offers. Fostering the
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‘right’ perceptions in the consumer mind is, then, a prerequisite for any successful marketing
action. However, the credibility of marketing efforts is itself subject to the perceptions and
attitudes of the recipient of these efforts. Therefore, the views of the consumers about the firm’s
marketing, and their evaluation and their satisfaction with it are an important factor in its
success (Gaski, 2008:195). The response of the consumers to the marketing of a firm rests also
on their perception and views of the marketing system itself. Assessing the attitudes of
consumers, not just towards the marketing activity of a firm but, in a macro perspective,
towards the marketing system itself, may help marketers to devise better marketing strategies.
Perceptions and attitudes are classified among the psychological influencing factors of
consumer behaviour; therefore, they are linked to the individual personality and pertain to the
individual sphere (Solomon, 2012: 43). However, people are also influenced by environmental
and social factors when forming their own individual judgment about the world around them.
Amongst these factors are reference groups. Reference groups are those groups of people who
have an influence on attitudes and behaviours of the individual. These groups can be small
(family, friends) or rather large (a social class, a political organisation) (Kotler & Keller, 2005:
252). Among the social influences on people’s behaviour, cultural background has an extreme
importance. Culture is a system of norms and values that shapes the behaviour of people
(Namenwirth & Weber, 1987:8). It is present at various levels (Erez & Earley, 1993: 23) but
the most pervasive is the national level (Steenkamp, 2001). As Hofstede said, nations are “the
source of considerable amount of common mental programming of their citizens” (Hofstede,
1991:12) and those nations with a long history (not necessarily as states) tend to be able to
exert a strong pressure towards integration. Various authors often use the concepts of nation,
people and country interchangeably (Sekaran, 1983; Nasif et al. 1991). Therefore, most cross
cultural studies, when identifying cultures, refer to national cultures as those present in a
specific country (e.g., Spanish culture, Italian culture, Japanese culture). This is mainly – but
not only – a Eurocentric point of view: after the French Revolution, Europeans spent two
centuries killing each other in the attempt to make sure that nation, people and state coincided.
Despite presenting a Eurocentric view, this correspondence is still predominant in many studies
(Trompenaars, 1998; Hofstede, 2011). National and ethnic in this case essentially coincide. In
the case of multi-national states as well as in the case of ethnic groups divided by borders, we
would maintain that the ethnic group gives what in other conditions is the national culture. We
can talk of a Zulu culture or a Kurd culture and we can talk of a Zulu people or a Kurd people
in the same way that we can talk of a German culture or a Japanese culture and a German
people or a Japanese people.
Cultural affiliation shapes perceptions and attitudes of people, also in relation to their approach
to marketing and the marketing system However, while the effects of national culture on
marketing have been studied within and across nations (states) (Jamal, 2003; Usunier & Lee,
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2005) considering nation and state one and the same, much less attention has been given to
cultural differences within the same country.
CONSUMER SENTIMENT TOWARDS MARKETING
In marketing literature, the term consumer sentiment has two different meanings. The first use
of the term was after the middle of the 20th century following the oft-quoted work of G. Katona
on the relationship between psychology and economics (Katona, 1963). In this context, it
indicates a macroeconomic index that measures consumer confidence in the economic outlook
and it is also called Consumer Confidence Index (CCI). It is a statistical measurement and
indicates the general health of the economy as perceived by consumer opinion. The CCI “is
based on households' plans for major purchases and their economic situation, both currently
and their expectations for the immediate future. Opinions compared to a “normal” state are
collected and the difference between positive and negative answers provides a qualitative index
on economic conditions” (OECD, 2016). This is the historical and more widespread use of the
term consumer sentiment.
The second meaning of consumer sentiment appeared in the 1970s. It refers to consumer
attitudes towards the marketing activity of firms (from product quality and price levels, to
retailing experience and information available), with the aim of understanding “the levels of
consumerist activity” (Lawson & Todd, 2003: 379). The first studies on the attitudes of
consumers and their reaction to marketing practice are credited to Barksdale and Darden (1972)
who used a five-item scale to measure the attitude of consumers towards marketing and
consumerism. They – together with Perreault – kept measuring the evolution of these attitudes
for the whole decade (Barksdale & Perreault, 1980), gaining considerable insights on the
relationship between affective reaction of consumers to marketing practice and their purchasing
intentions and behaviour. The basis of this approach originated from the work of Gaski and
Etzel (1986), who developed the Index of Consumer Sentiment toward Marketing (ICSM), “a
multidimensional scale designed to measure household sector sentiment or attitude toward
consumer marketing and its various functional components” (Gaski & Etzel, 2005). Later on,
Fornell et al. (1996) developed a similarly aimed market-based performance measure, to assess
consumer satisfaction with products at the level of firms, industries, sectors and nations. The
American Customer Satisfaction Index (ACSI) “measures the quality of the goods and services
as experienced by the customers that consume them.” In the following years, both indices
became widely used, although being of different nature: the ACSI measuring consumer’s
satisfaction with products of firms (each firm’s products evaluated), the ICSM measuring the
consumer sentiment towards marketing in its 4-Ps manifestations. Consumer attitude towards
the marketing actions, rather than products, is then at the basis of the latter.
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Consumers can form an attitude (or sentiment) when, after they experience and evaluate
something, they mature a predisposition towards that something. This predisposition or attitude
shall then influence their (purchasing) behaviour. Consumers’ perception of marketing is
shaped by their experiences with the products they acquire (or do not acquire), the price they
pay for them, the communication they receive about them and the experience they have in
actually purchasing them. In fact, these are the elements of the marketing mix and the
consumers experience with them is the basis of the ICSM (Gaski, 2005:859). The original
ICSM comprises 28 items (but it is possible to whittle them down to 20, per Cronbach α
evidence) grouped into four multi item (7 or 5 each) Likert scales. Each scale corresponds to
one of the four elements of the marketing mix (i.e., product, price, promotion – mostly
advertising – and distribution – through perception of retail service). The consumers evaluate
these elements accordingly to how they experience them. The index drawn from these
evaluations gives a descriptive feedback that allows marketers to understand – through a
measure of the consumers perceptions of marketing – what effect their activities have on the
consumers at large. Moreover, by measuring the difference in the perception of the marketing
mix, it allows to appreciate how well or less well the public receives the stimuli from each of
the four elements.
From the beginning, the ICSM appeared suitable for application in other countries than the
USA, where it was developed. Various scholars replicated the study in other countries and
tested the scales as measurement instrument of the attitude of consumers toward marketing in
different economic environments with widely different intensity and sophistication of
marketing activity (Wee and Chan, 1989; Chan, Yau and Chan, 1990; Boshoff and Du Plessis,
1992). The use of these studies allowed checking the suitability of this instrument in different
conditions and making sure that, indeed, it is transferrable in various countries. It was thus
possible to arrive at the conclusion that the ICSM is a “measurement instrument, which could
be transferred into another national context with very different marketing environment without
losing its reliability and validity” (Holzmüller & Hafenscher, 1993).
This index therefore provides valuable information to international marketing managers,

particularly in selecting markets (identifying those more responsive to marketing action) and
in adjusting their marketing policy to local perception. The opportunity to use this tool to
understand differences in various environmental contexts allows for checking the influence of
different environmental variables on consumers perceptions. It has been observed that one
important avenue of the replications studies on consumer sentiment is the “search for individual
(personal) characteristics that might explain variations in levels of sentiment across the
population” (Lawson & Todd, 2003: 380). Demographic variables such as gender, age, marital
status, education as well as socio-economic ones such as income, occupation, lifestyle have
been found to have a significant relationship with consumer sentiment. However, different
authors generally found different variables and in the end, the results are rather mixed. It is
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possible that as the studies were carried out in different countries with different environments,
this has affected the weight these variables have in each case. For example, the variable
“language” is found to have a significant relationship with consumer sentiment in two studies
(Boshoff & Du Plessis, 1992 and Boshoff & Du Plessis, 1995) both referring to a multi-ethnic
country such as South Africa. This however makes it possible to focus on culture (at whatever
relevant level one prefers to focus on) as a possible explanatory variable of differences in
consumer sentiment towards marketing. Such an approach would be particularly relevant in
multi-ethnic and therefore multi-cultural countries.
ETHNICITY, IDENTITY AND CONSUMPTION
There is a certain lack of clarity and divergence with the terms ‘people’, ‘nation’, and ‘ethnic
group’, which leads to divergent use of these words. However, when referring to a dictionary
it appears clearly that ‘people’ (“a body of persons held together by belief in common origin,
speech, culture, political union or other bond”; Chambers’s Twentieth Century Dictionary,
1970) and ‘nation’ (“a body of people marked off by common descent, language, culture, or
historical tradition”; ibidem) are the same thing. Moreover, it appears clearly that self-
identification is an important component of the belonging to such groups. Ethnic identity is
then in part linked to an individual’s perception of belonging to a group and also to the group’s
self-identification, to the point that the individual self-identification to become effective must
be accepted by the “in-group” (Trimble and Dickson, 2010). Indeed, when considering the
definition of ethnic group as a “social category of people based on perceptions of shared social
experience or ancestry. Members of the ethnic group see themselves as sharing cultural
traditions and history that distinguish them from other groups. Ethnic group identity has a
strong psychological or emotional component that divides the people of the world into
opposing categories of “us” and “them.” (Peoples and Bailey, 2012), it is possible to see the
expression of the same concepts that are used in the dictionary to define ‘people’ and ‘nation’.
From this definition, it appears clearly that self-identification and acceptance go together and
are essential to the existence of the ethnic group itself (members of the ethnic group see
themselves as sharing cultural traditions […] that distinguish them from other groups).
This obviously applies to any ethnic group, and becomes extremely important in the case of
multi-ethnic countries as well as countries where recent heavy influx of foreign people changes
the traditionally accepted homogeneity of the local population. In both cases, the individuals
differing from the predominant group face a choice between holding on to their culture of origin
and accepting integration to become part of the “mainstream”. However, although ethnic
identity is not immutable, it is a sharing of norms and values of the group one identifies with.
Therefore, it can affect the behaviour of the individuals in any aspect of their life, including
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their consumption pattern, purchasing behaviour and attitude to marketing. Altogether, it is
possible to consider ethnic identity as one of the social factors affecting consumption patterns.
However, in a multi-ethnic country where the ethnic difference is linked to a migration process,
this influence can vary according to the degree of integration of the individual into the
dominating culture and society. It depends on the situation wherein the individual is in relation
to the purchasing opportunity. Both types of products and social occasions can determine
whether consumption will follow the original culture pattern or that of the new place. (Stayman
& Deshpande, 1989).
A large part of the initial studies on this topic originated in the USA in the 1970s and 1980s.
Thus, they are highly locality-dependant, in the sense that they describe and study a situation
that is peculiar to the area where the study takes place. This means that it is necessary to
understand which of these results are valid in general and which are linked to the local
environment, and therefore, not directly applicable to the rest of the world. In particular, one
should be careful to transfer assumptions, findings, and conclusions originated in such a
specific place – particularly in relation to ethnic and race issues – as the USA to other countries,
the more so when the countries in question are multi-ethnic as a consequence of a historical
process totally different from that of the USA.
The concept of Ethnoconsumerism, developed by A.Venkatesh, grew in a context where

scholars had become aware of ethnic influence on the consumer. The author moves from the
observation that all consumer behaviours must be considered “as primarily sociocultural
phenomena that must, therefore, be discussed in sociocultural terms” (Venkatesh, 1995:29).
Ethnoconsumerism requires that the analysis of the consumer be made considering the
individual, not just as an individual, but as a member of a cultural group (although both the
culture of the group can slowly change and the felt ethnicity of the individual may also change).
This is a good approach to study how consumer behaviour may vary within a multi-ethnic
country.
ETHNIC MARKETING
Paying attention to the ethnic identification of the consumers becomes more important
nowadays, when ever more countries tend to move more or less rapidly and intensely to the
‘salad bowl’ model, where the various ethnic units keep their own characteristics, despite being
included in a single system. Ethnic marketing aims to develop techniques capable of attracting
consumers who belong to an ethnic group and of making them loyal customers. Normally in
the definition, the term used is not ethnic group but ethnic minority, but we feel this is very
much dependent on it being developed in places where marketing efforts had never been
differentiated on a cultural basis. From the definition of Ethnoconsumerism given above, it is
obvious that everybody’s consumption pattern is affected by their cultural make up, regardless
498
of the size of the group they belong to. Therefore, if marketers want to reach their customers,
they have to consider their ethnic background even if they belong to a group that is the majority
in a certain place.
Certainly, the attention to and study of ethnic marketing has followed the development of the
socio-political relevance of the minorities in the most marketing-oriented market, i.e., the USA.
This also explains why literature on this subject is not huge, and mostly, fairly recent (Cui,
2001:23-31). The obvious reason being that, on the one hand, until recently the biggest ethnic
sub-groups, coming from Europe, were relatively contiguous to the “mainstream” and willing
and able to assimilate, and, on the other hand, when less contiguous, those groups were a small
proportion of the population and had an even smaller proportion of the disposable income.
Consequently, it appeared pointless to develop marketing strategies that considered their
peculiarity. With the developments in the technological field and the evolution of marketing
thought, considering the peculiarities of an ever-smaller segment of consumers became
possible and was found desirable. Focusing marketing efforts on ever-smaller niches has
become the way to gain and keep a competitive advantage in a market characterised by a fickle
consumer, whose brand loyalty has weakened.
In the last decades the interest towards ethnic marketing has grown and a relatively large body
of literature has developed (for a full survey of literature up to the turn of the century, see Cui,
2001). In it, it is possible to distinguish two schools: the American one and that of scholars
from countries of recent immigration or of long standing ethnic diversity. The first one –
although studies on immigrant nationalities, as opposed to racial groupings, had appeared in
the 1990s (Penaloza, 1994) – still tends to define ethnic groups on the basis of race (e.g.,
Pearson-McNeil & Ebanks, 2015) – wherefrom the distinction between “Black Americans”,
“Hispanics”, “Asians” – overlooking the fact that within each of these groups there is a variety
of ethnic groups. On the contrary, scholars from countries of more recent immigration or long-
standing ethnic diversity have given more consideration to the ethnic groups more precisely
defined (Erdem & Schmidt, 2008). Indeed, the appropriateness of the American approach – at
least when other countries are studied – has been seriously questioned (Heere et al, 2015).
Indeed, ethnic marketing as a discipline was born in the USA with the aim of analysing the
consumption pattern of the minorities in that country. The first study on the topic is reportedly
that of P.K. Edwards (1932) and few other appeared until 1960s. Thereafter, ethnic marketing
(in the sense used by the American school) become an ever more important topic. With the
forecast that by the middle of the following century minorities would make up more than half
the American population, and with the observation that the minorities were moving from a
lower class of income to the middle class, the theme of their perceptions and attitudes to
marketing became ever more relevant.
499
In a situation of multi ethnicity, the study of consumer sentiment towards marketing becomes
a particularly good tool for supplying the information necessary to an effective positioning of
products and tailoring of the whole marketing effort. The research on which this paper is based
was structured with particular attention to the ethnic composition of the respondents in order
to assess whether ethnic identity affects their sentiment toward marketing. However, this paper
presents a first reading of the data collected, giving an overall view of the sample as a whole
without discussing the ethnic aspect.
THE RESEARCH OBJECTIVES
In the light of the above discussion, the aim of this study is to determine the South African
index of sentiment towards marketing (ICSM). Linked to the aim are the subsequent objectives:
Determine the importance of the marketing dimensions
Determine the attitudes towards the marketing dimensions
Calculate the sentiment index scores for each of the marketing dimensions and the overall
ICSM
Compare the South African ICSM with findings of previous studies of other economies.
THE RESEARCH METHOD
Data collection and sampling
The target population comprised of South Africa citizens across the seven administrative
regions in the Tshwane metropolitan area (North West, Central Northern, Central, South West,
North East, South East and East). Resource constraints necessitated restricting the survey to a
single metropolitan area in South Africa. Tshwane was selected since it is the largest urban
municipality in South Africa and the third largest in the world after New York and Tokyo
(Tshwane, 2015). The location of a number of public and private sector firms, educational
institutions, state and central government offices, and defence establishments in Tshwane have
been instrumental in attracting people from various ethnic groups of the country to this city.
The size of Tshwane, urban, rural and industrial components as well as the diversity of the
types of development and infrastructure allowed the researchers to obtain a sample reflecting
the diversity of South Africa.
Quota sampling was applied to produce a sample that reflects the population of Tshwane by
choosing a relative equal proportion of people in different categories (gender, age and
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race/ethnicity). Respondents who passed selected data collection points at or close to various
retail- and transport facilities in the regions were intercepted and screened to ensure they are
South African citizens and meet the quota requirements and then invited to participate in the
study.
To ensure data stability and a sample size similar to previous studies conducted in other
developing countries (Fernandes, & Pimenta, 2013; Nguyen, Thanh & Tran, 2011; Peterson &
Ekici, 2007; Wee & Chan, 1987) a reasonable sample size of at least 700 was aimed at. An
interviewer-administered survey method by trained interviewers was adopted to ensure
acceptable reliability and response rate, resulting in 727 usable questionnaires. No attempts
were made to survey the informal settlements that are located far away from the urban areas
due to resource constraints, the multilingual nature and relative low level of proficiency in
English of these areas. However the sample included respondents from low-, middle and high-
income levels, as well as all the main ethnic groups in each region.
The measuring instrument
The questionnaire containing the ICSM that served as measuring instrument, was originally
developed by Gaski & Etzel (1986) and subsequently used in several replication studies across
the globe (Gaski & Etzel, 2005; Ganglmair-Wooliscroft, & Lawson, 2012; Hou Wee & Chan,
1989, Lawson, Todd & Boshoff, 2001; Peterson & Ekici, 2007; Webster, 2011). The ICSM
shows rigorous psychometric characteristics. Values for Cronbach’s alpha ranged between 0.76
for promotion and 0.82 for retailing/selling in the original study in the USA by Gaski and Etzel
1986 and subsequent replications carried out in developed and developing counties have shown
comparable acceptable values and confirmed the dimensionality of the model (Chan, Cui &
Cui, 2004; Gaski & Etzel, 1986; Gaski & Etzel, 2005, Lawson, Todd & Boshoff, 2001).
The first section of the questionnaire used for this study comprised of questions regarding the
respondents’ demographic information (gender, age, race/ethnic group, employment, education,
income and religious affiliation). In the second section ICSM was assessed based on consumers’
sentiments and relative importance attached to marketing practices in four dimensions.
Sentiments towards marketing practices were measured via attitudes towards the four major
elements of marketing practice- product, price, advertising, and place (also referred to as
retailing/selling). It comprised of 25 items equally divided between the elements that were
measured on a five-point scale, with 1 representing strong disagreement and 5 strong agreement.
For the importance weight consumers had to rate each of the marketing elements, where 1
indicated ‘Very important’, and 5 represented ‘Not important at all’.
501
A pre-test was carried out with 10 subjects not included in the sample that was used to establish
the level of reliability. The data collection commenced across the city of Tshwane’s
metropolitan municipal area after some minor adjustments to the questionnaire.
The data analysis
A statistical data analysis was performed using the IBM Statistical Package for the Social
Sciences (SPSS) Version 23 software. For the mechanical construction of the scale the
measures for each of the marketing elements were averaged into a single index and then
importance-weighted. The overall ICSM was calculated by summing the weighted dimension
composites across the four dimensions. The formula for the ICSM index is indicated below.
xij = scale item response / in category (marketing element) j,
wj = importance weight for the marketing element category j ,
m = number of items in marketing element category (5), and
n = number of marketing element categories (4).
THE RESULTS
Table 1 presents the reliabilities for the sentiment scales of the marketing elements as well as
the overall values. All reliabilities are acceptable since they exceeded the 0.7 minimum
suggested by Nunnally (1978).
Table 1: Reliability scores or measurement indices
Number of items
Product 0.76 5
Price 0.77 5
Promotion 0.77 5
Retailing/selling 0.75 5
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Overall 0.87 25
With regards to the demographic characteristics of the sample gender is relatively equally
represented with 49% males and 51% females. Most of respondents are between 19–30 years
(45%), followed by those who are 31–40 years old (28%). It is also clear that majority is
employed full time (52%), however 22% indicated that they are currently unemployed. Most
of those interviewed are blacks (67%), and represent the major languages- and ethnic groups
of the targeted regions (City of Tshwane, 2015). The household income of the majority of
respondents (48%) is below 10 000 ZAR (607USD) per month, while almost 20% has a
household income of between 10 000+ to 20 000ZAR (607+ to 1214USD) and 20 000 to
30 000ZAR (1214 -1821USD) per month. The relative low and unequal income distributions
as well as the younger average age of the survey are typical features of the South African
population (Tshwane, 2015). The highest level of education for more than one third (35%) of
the respondents is Grade 12. Very few (4%) have not completed secondary school, while the
majority have pursued some level of further education (64%). Christianity was the dominant
religious group (70%) followed by Islam (9%) and African traditional believers (5%). After
examination of key demographic indicators, the results can be regarded as representative of
Tshwane and to and to a large extent the South African adult population (Tshwane, 2015).
Importance weights of the marketing dimensions
The mean importance weights for the four dimensions in table 2 reveal that product (M=4.50)
and retail/selling conditions (M=4.31) are perceived as the most important by consumers. The
levels of agreement are also the highest for these two dimensions as indicated by the standard
deviations (product SD=0.69; retail/selling conditions SD= 0.77). Promotion is the least
important, although it still reflects a relative high level of importance from the consumers’
perspective (M=3.80).
Table 2: Statistics for importance weights of the marketing-mix dimensions (n=727)
Mean SD
Product 4.50 0.69
Price 4.23 0.83
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Promotion 3.80 0.98
Retail/Selling conditions 4.31 0.77
The attitudes towards the marketing dimensions
In table 3 one can see that consumer attitudes towards product were the highest (M=3.60) and
for price the lowest (M=3.04). This implies that attitudes towards the product dimension are
more positive than towards the price dimension. The level of agreement was rather similar
when comparing the standard deviations of the four dimensions.
Table 3: statistics for attitudes towards the marketing-mix dimensions (n=727)
Mean DS
Product 3.60 0.73
Price 3.04 0.79
Promotion 3.54 0.76
Retail/Selling conditions 3.47 0.75
The sentiment index scores for each of the marketing dimensions and the overall index
Table 4 presents the scores for each dimension of the marketing mix and the total ICSM scores.
The index for each dimension was computed by converting the scales (to a format of -2 to +2,
so that the theoretical mean was 0), and then summing the responses for the five questions
comprising each dimension. This resulting score was multiplied by the importance rating given
by each respondent to the corresponding dimension. The total scores for each of the dimensions
can thus achieve a maximum of +50 and minimum of – 50 and for the total score the index a
range between +200 and – 200 is possible. It can be seen that none of the dimensions reached
this maximum score, and the product dimension had a higher value than the rest (+45). For the
minimum, values were also not obtained and the product dimension reached the lowest value
(-25). The mean consumer sentiment score obtained (the "index" measure) was 1.35. This
504
implies that aggregate consumer attitude toward marketing in South Africa is very slightly in
the favourable range.
Table 4: ICSM scores per dimension of the Marketing-Mix and the total
Mean SD Min Max
Product 0.62 13.43 -45 25
Price 0.52 3.98 -10 5
Promotion 0.59 3.60 -10 5
Retail/Selling -0.39 3.98 -10 5
Overall sentiment index 1.35
A comparison of the South African ICSM with findings of previous studies of other economies
Table 5 shows the ICSM across several countries in descending order. It can be seen that the
ICSM observed value differs considerably with Australia (Chan, Yau, & Chan, 1990) reporting
the lowest ICSM (-26.12) and Portugal (14.95) the highest in the year 2013 (Fernandes, &
Pimenta (2013). It also reveals that South African consumers seem to be more positive toward
marketing practices in comparison to the developed (Australia, USA) and developing countries
belonging to transition economies (Turkey, Bangladesh and China). However they are slightly
less positive than Hong Kong, New Zealand and Portugal.
With regards to attitudes toward the different dimensions, consumers in South Africa have
slight positive and almost similar sentiments towards three of four the dimensions, product
(0.62), price (0.52), and promotion (0.52), but a slight negative sentiment towards retail (0.38).
This negative sentiment is a reason for concern since consumers regarded it as one of the most
important dimensions. The negative results seem to be a result of the consumers’ dissatisfaction
with the effectiveness and assistance provided in retail stores. The major changes in retail
infrastructure in South Africa such as the dramatic growth in large shopping centres with large
retail chains and little customer interactions and customization might have influenced the
perception of retailing.
505
Table 5- ICSM scores for different countries
index
Overall
index
Product
index
Price
on index
index
Promoti
selling
g/
Retailin
Researchers Country
Chan, Yau, & Chan (1990) Australia -26.12 -10.61 -15.25 -4.27 4.01
Peterson & Ekici (2007) Turkey -20.81 4.34 −16.95 −5.03 −3.25
Gaski & Etzel (1986) USA -14.84 0,82 0,77 0.76 0.78
Shahriar Ferdous &

Bangladesh -8.62 2.26 -8.44 -2.73 0.29
Towfique (2008)
Cui, Chan & Cui (2004) China 0.84 1.37 0.58 0.04 1.34
South
Current study (2016) 1.35 0.62 0.52 0.59 -0.39
Africa
Nguyen, Thanh & Tran

Vietnam 1.56 0.27 0.56 0.38 0.38
(2011)
Wee & Chan (1987) Hong Kong 2.97 6.80 -2.36 -2.07 0.65
Lawson, Todd & Boshoff New

12.71
(2001) Zealand
Fernandes, & Pimenta

Portugal 14.95 0.97 1.66 0.43 0.51
(2013)
LIMITATIONS AND CONCLUSIONS
Limitations
As with all the other studies, this research has certain limitations. The current study is cross-
sectional and was conducted in a single metropolitan area. This could be a good reason for
future longitudinal research and to expand the study to include a representative sample of
citizens across the country. Informal settlements that are located far away from the urban areas
were not included in the sample of this survey. In future researchers might obtain financial
506
support to translate the questionnaire in all eleven official languages and make use of
multilingual fieldworkers to collect data from these areas. The study has had a broad focus in
terms of South Africans’ overall consumer sentiment towards marketing across ethic and
demographical groupings. A worthwhile future research agenda would be to investigate the
effect of demographic factors including age, gender, education background, and occupation
and the effects of ethnic identification.
Conclusions
The analysis of the existing academic literature revealed no recent research on South African
consumer sentiment towards marketing. For that reason, a survey was conducted to determine
the South African index of sentiment towards marketing, both in South Africa as a whole and
for the different ethnic groups making up its population.
For researchers of marketing in developing countries, this study provides valuable insight into
how consumers in a developing country regard marketing practices offered in their Aggregate
Marketing System. The Index of Consumer Sentiment toward Marketing, presented in this
study, offers the opportunity to understand the true state of the consumer’s attitudinal relation
with marketing practice. According to the mean importance weight of the four marketing-mix
dimensions it is possible to observe that the product and retail/selling conditions are the most
important components to determine the South African index of sentiment towards marketing.
Consequently marketers should focus their strategies on these elements.
The negative sentiment towards retail is reason for concern and should be investigated in-depth.
The economic forecast of South Africa is uncertain and economic activity will likely remain
subdued in the near future. The South African government should therefore ensure that
consumers are aware and educated regarding their rights and mediation with regards to
unethical and substandard business marketing practices. The Consumer Protection Act can, for
example, be used to regulate the responsibilities of retailers and their suppliers with regards to
after sale service such as guarantees and warranties to repair or replace products if they are
damaged or faulty.
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Factors Affecting Customer Satisfaction of the
Privatized Extension Services
Gabriel Malima
gabriel.malima@nm-aist.ac.tz
Bukaza Chachage
bukaza.chachage@nm-aist.ac.tz
Nelson Mandela African Institution of Science and Technology, Tanzania
;2
Abstract
The decline of the dominance of the public sector in service delivery led into the emergence of
the private companies’ involvement in the agricultural extension service delivery. This
situation has offered an opportunity for the smallholder farmers to access the services which
were limited provided by governments. In spite of this advantage, it is most likely that private
companies will face challenges in agricultural advisory service delivery, especially when
farmers are not satisfied. The private company in Kenya offering soil test services is used as a
case to explore the factors that influence the customer satisfaction in privatized extension
services . The findings revealed that farmers’ satisfaction was affected by the time the soil
analysis report is delivered, understanding of the soil analysis report, making use of the service,
biophysical responses in crops grown and communication after the service delivery. As the
private companies emerging in providing extension services, these factors are important
aspects to consider during the service delivery by these new players.
Introduction
One among the agricultural extension services that are essential for the soil fertility
management is the soil analysis. Soil analysis is the method conducted to determine the amount
of nutrients that are available for the plant use. The fertilizer recommendations that follow the
soil analysis are essential because they enable farmers to determine the inputs required by
plants (FAO, 2000). Because of the cost of conducting soil analysis and lack of Soil test
facilities, the government research institutes were doing soil mapping, then offer ‘blanket’
512
mineral fertilizer recommendations to farmers based on agro-ecological zones (Zingore, 2011).
These fertilizer recommendations were offered for free to farmers as part of the
government/state dominated extension service system. However, starting from the 1990’s there
was a gradual declining of the dominance of the state in service delivery (Davis and Place,
2003; Lopokoiyit et al. 2013). This decline was mostly caused by the structural adjustment
programs of the 1980s and 1990s that led to the public sector reform (Rivera, 2004). Following
the declining of the state dominated extension services, private companies emerged and start
to sell the agricultural advisory (extension) services. In this line, a soil testing private compay
has been established in Kenya with the aim of offering soil testing services to smallholder
farmers (We make the company’s name anonymous to maintain the company’s
Confidentiality). The Company has combined two innovative approaches to reach the
smallholder farmers; Infrared spectroscopy (IR spectroscopy) method and the Mobile Soil test
laboratories. The IR spectroscopy method is quicker than the traditional wet chemistry method
that is used by many governments operated laboratories. The company’s mobile laboratories
(mobile lab) that run soil analysis using IR spectroscopy travelled around and test soil on
location. Farmers who test their soil can receive the soil test report with two hours. The soil
test report contains soil analysis results and fertilizer recommendations printed in a piece of
paper. The report is handed to the farmers, accompanied by technical advice and/or
clarifications from the agronomists. To get the report, farmers have to pay to the company for
the service. When buying Soil testing services, what a farmer gets is a technical advice whose
usefulness might be realized after months and sometimes years. The idea of privatised
extension service like this one is new in amny developing countries. It is not clear if farmers
will accept the client role and start purchasing the services that used to be offered for free by
government. In addition, once farmers start to purchase the service, it is not clear wheather they
will continue to do so or not. Farmers’ decisions to continue purchasing the service will mostly
likely be influenced by the satisfaction of the service delivery. The farmers’ satisfaction is more
likely to be influenced not only by the service delivery, but also by various technical, social-
economical and agro-ecological factors which are yet not known. In trying to answer the
question “What are the soil testing service delivery factors that affect the customer
satisfaction?”, We conducted a qualitative study to explore the contextual environment of
which the soil testing service is provided to smallholder farmers in Kenya.
Theoretical Highsights
Paying for advisory services such as soil tests can be considered as one of the major challenges
in the transition period of moving the service delivery role from the government to the private
companies. Experience from National Agricultural Advisory Services (NAADS) in Uganda
showed that paying for advisory service by farmers was still a great challenge (Parkinson,
2009). It becomes more challenging when the financial arrangement of the advisory service
delivered takes the form of direct cost recovery whereby farmers pay fee for each service
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provided to an individual or group. Paying for advisory services means farmers are taking the
role of clients. Acceptance of this client role of farmers depends on whether they feel that they
are satisfied with the service or not.
Customer satisfaction is defined as a customer’s overall evaluation of the performance of an

offering to date (Osei-Mensah et al. 2012). Business entities focus on satisfying customers so
as to maintain the existing customers and attract new ones. The potential to increase the
customer’s satisfaction contributes to the decrease in the number of customer walkouts (Kuo,
2013). When farmers chose to follow a particular farming practice (for this case, fertilizer
application according to soil recommendations from a Soil test mobile lab), they do that seeking
better biophysical responses particularly better crop performance and yields. In a study by
Okello et al. (2012), it was found out that in producing Kale, farmers chose to apply inorganic
fertilizers so as to produce good looking, faster growth and aesthetic quality of Kale in Kenya.
Positive biophysical responses as an outcome of purchasing the soil test are likely to enhance
customer satisfaction. Glendenning et al. (2011) one reason of farmers’ dissatisfaction after
tests was the consequence or outcome of the information given was not satisfactory.
Quality and timely information are other variables that can affect customer satisfaction level.
A survey by Yazdanpanah et al. (2013) using American Customer Satisfaction Index Model,
found out that perceived quality was an important component for farmers' satisfaction level
than the price of the service. A study by Glendenning et al. (2011), identified the lack of timely
information as the main feature of the farmer dissatisfaction of advisory services from agro-
clinics. Other reasons of dissatisfaction was the information needed not received. In evaluating
satisfaction of the quality of advisory services, Agholor et al. (2013) found out that timely
delivery, relevance, accuracy and ease of understanding of information were variable that
increase customer satisfaction level. The cost of services and grower’s opinion about private
companies were also found to have great effects on farmer’s satisfaction with agricultural
services companies (Ghahdarijani et al. 2008). Usefulness requires the ability to interpret and
make use of the service. A soil test is usually followed by fertilizer applications according to
the fertilizer recommendations. Application of fertilizers and other inputs require a farmer to
invest money on purchasing of those inputs. This situation makes soil fertility management
highly complex given the myriad of interacting factors that dictate the extent to which farming
households invest in the fertility of their soils (Mowoa et al. 2006).
Methodology
The study involved 116 farmers from the following counties in Kenya; Uasin Gishu, Trans
Nzoia, Bungoma, Nyandaru, Busia, Nyeri and Embu counties. Five counties were selected
because the company, which is used in this study as a case reference had worked there in 4-6
months at the time when the study was proposed. Two other counties were randomly picked
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based on the mobile lab schedule at the time of the study. At this time the lab moved to Nyeri
and Embu counties.
Data collection methods were in-depth face-to-face interviews, phone call interviews and
observations. Data were collected in three ways; collected while the researcher was moving
with the mobile lab, by visiting farmers in the villages and through phone call interviews. In-
depth interviews were conducted to the purposively selected seven farmers who visited the
mobile lab but never tested the soil and to seven farmers who tested their soils. The company
customers’ database was used to purposively pick 102 other respondents. Those who were
picked had to be small scale farmers, mostly had farm with the size of less than 10 acres.
Another criteria was a customer should have tested his/her farm soil 4-6 months before the time
the study is conducted. Out of these 102, seven were visited in the villages for in-depth
interviews and 95 were interviewed through phone calls. Table 1 below shows the
characteristics of the respondents.
Table 1: Characteristics of the respondents
Country and Data Gender Farm size Soil test service

collection technique usage
deployed Female Male Category Percentag
(acres) e
In-depth interviews 4 17 Below 1 14 7 never purchase the

service
(Smallholder
farmers) 1-5 52 7 purchased the
service
6 - 10 29 7 purchases the
service 4-6 months
Above 10 5 ago
Phone call 28 67 Less than 7 Purchases the soil

interviews 1 test service 4-6
months ago
(Smallholder 1-5 49
farmers)
6-10 19
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Above 1 24
Findings
The majority of the respondents said that they understood why they are supposed to pay for the
service. In spite of being aware that the service is also offered by the government institutes,
most of them had never tested their soil before. The responses of 102 respondents who tested
their soil 4-6 months ago are tabulated in Table 2 below;
Table 2: Soil test main reasons
Reasons to test soil N %
Poor crop performance/yields drops 50 49
The extension officer advised 10 10
Advised by other farmers 8 8
Wanted to know my soil type/fertilizers 5 5
Others 19 19
No response 10 10
TOTAL 10 100
2
Respondents who visited the mobile lab said that they understood why they are supposed to
pay for the services. It was further learned that the decisions to purchase soil testing service
was mainly influenced by the expectations that the service will lead to an increase of the farm
income. It was also found out that the family members’ opinions influenced the decision to test
soil by some respondents. One phone call respondent explained how he came into the decision
to test soil
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“Even my family started to complain why yields are dropping. I used to get between 280 and
300 bags of maize, and then it dropped to between 120 and 180 bags. So, I decided to test the
soil”
In spite of accepting the role of paying for the services, paying was also identified to be a
barrier to some respondents. Those who did not test their soil said that they had no money to
pay for the service. During a face-to face interview, a respondent X4 commented “It is really
hard for people to test soil now because they have not received their coffee payments, many
farmers from my area depend on coffee.”
Respondents were interviewed on how the service was delivered, starting from the moment
they purchase the service to the time they observe the outcome of the service in their farms.
Through the interviews the following aspects were identified as the main factors that affected
the respondents’ satisfaction level; Timely delivery of the analysis report, understanding of the
report, making use of the service, biophysical responses and communication. Time the analysis
are delivered
After soil tests, farmers were given soil testing reports indicating the soil nutrients contents and
fertilizers and lime recommendations. Most of the respondents who got the reports on time
expressed their satisfaction with their service“They did good, my results came quickly…. I am
satisfied with the service”
It was learned that handling the technical reports to customers on the same day was not always
happening, especially when the mobile lab was overwhelmed with customers. When the above
situations occurred the remained reports were posted through county offices, extension agents,
chiefs, contact farmers or through e-mails. In addition, county offices or existing Non-
government organisations (NGOs) were given reports to deliver to farmers. It was then
revealed that using county officers/ extension officers or NGOs officers to deliver the report
was problematic because it was reported that the reports via this officers were either never
delivered or delayed.
Table 3: Responses from 102 respondents who tested their soil 4-6 months ago are tabulated
below
Report delivery status N %
Got the report on time 52 51
Delayed to get the report 18 18
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Never got the report 32 31
TOTAL 102 100
During the interviews, most of the respondents who never got the reports or delayed getting
the reports expressed their dissatisfaction of the services. Some of the comments were as
follows;
“I have not received soil testing results; they keep on saying it is coming, it’s coming, till today,
nothing….next time I will not allow them to take my money.”
“The report came I had already planted, so what is the use of it now.”
Understanding the report
The majority of the phone call respondents who got the reports said the report was easy to
understand. Out of 70 respondents who tested their soil for 4-6 months, and received the soil
test report, 76% said the report was easy to understand, 14% said that the report was somehow
difficult and hence they had to consult the extension officers, The two groups above pointed
out that understanding of the report made them satisfied with the company’s services. The
findings are supported by comments from two of them;
“They told us good advice, I clearly understood, they did not just give a report; they also spoke
to us, that was very good”
“They gave me a report and also told me what to do, that was so good”
On the other hand, there were 10% of the respondents who said the report was difficult to
understand. Most of these respondents reported that they did not receive the reports direct from
the company mobile lab. The reports reached them trhough county officers or NGOs.
Making use of the service
Although many respondents who tested soil 4-6 months ago said that they understood the
reports, most of them admitted that they did not follow the report recommendations. The main
reason mentioned were inputs being either unavailable or too expensive for them to afford. It
was learned that the majority of respondents had not applied lime. Some could not get the type
of fertilizers recommended. Some of the comments from the phone call respondents were:
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“I did not apply lime as recommended. Lime... is not available here, you have to travel to
Eldoret to get it, and it is expensive anyway.”
“I was advised to apply a lot of lime to correct soil acidity, I could not do it, I could not afford.”
“So if you go to Muhindi, [Muhindi is the Swahili word for an Asian businessman] you don’t
get those fertilizers, these people [The Company] instructed us to use, you don’t get them”
Responses from 70 respondents who tested their soil for 4-6 months and got reports are
tabulated in Table 5 below;
Table 5: Respondents reporting whether they followed the recommendations or not
Response N %
Followed all recommendations 17 24
Followed some of the recommendations 33 47
Could not follow any of the recommendations 18 26
Not yet (Planting now) 2 3
TOTAL 70* 100
*The total is 102 because 32 respondents said that they either never got the report or the report
delayed to reach them
Among the most difficult recommendation to follow was the application of agricultural lime.
Slightly, more than half of the respondents (52%) said that they could not apply agricultural
lime. However, in spite of failed to put into use the fertilizer recommendations, most of these
respondents who could not put into use the service said that they were satisfied with they way
the company had delivered the services.
Outcome of the service (Biophysical responses)
The customers who got the report on time and were able to follow the inputs recommendations
were asked on whether they saw any change in their fields this season compared to last season.
It was found out that the majority of farmers had seen differences in crop performance.
Respondent C3 took the researcher through her maize farm and then in her greenhouse,
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explained how a change of the fertilizers and lime application after soil analysis has changed
the crop growth and appearance. A respondent C1 who tested soil and followed all the
recommendations express his satisfaction for the service through the following comment.
“I have not harvested yet, but there is a big difference. I put the agricultural lime and planted
the way they instructed me, now if you look at my maize, even the stems are bigger and
healthier than those of last year, and the plants have two ears each, last year they had a single
ear each’’
During the phone call conversation, the majority of the respondents said that they saw changes
in their fields after following soil test recommendations and also they were satisfied for the
service. Most of them had positive yield expectations. Responses of the respondents who tested
their soil 4-6 months ago and used the report are tabulated below (Table 7)
Table 6: Respondents reporting crop performance after soil testing services, comparing current
season and last season
Crop status n %
Better 33 77
Cannot say for now 6 14
Normal 1 2
Worse 1 2
Can’t determine (I am now planting) 2 5
TOTAL 70 100
*The total is 102 because 32 respondents said that they either never got the report or the report
delayed to reach them
Communication during and after service delivery
The clarifications given by company agronomists were found to positively influence the
customers’ satisfaction. One of the respondents said;
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“They told us good advice, I clearly understood, they did not just give a report; they also spoke
to us, that was very good”
It was found out that the communication between the company and the customer after service
delivery was not as good as customers wanted. Some respondents who wanted to get further
clarification of the reports could not talk to the service provider. Some of the comments from
phone call respondents were:
“After applying fertilizers I saw my onions, turning yellow, I wanted to ask them why that was
happening, but they did not pick my calls, it is really hard to contact them after the service.
Thanks God the crops turned green after that”
Respondents who got the reports on time expressed their satisfaction with the service. The use
of the IR spectroscopy technology increase the soil test speed and that was reflected to the
customer satisfaction. One among many positive comments from the interviewer was
“Their service is good; they give you the results on the same day that was good”
Discussion
Most of the farmers accepted the idea of paying for advisory services. The arguments presented
by the majority of the farmers were not whether they should pay or not, but it was how much
they can afford to pay. Contrary to what was witnessed in programmes such as NAADS in
Uganda (Parkinson, 2009), here farmers seemed to accept and/or being able to accept the ‘client’
role. One of the main drivers towards the service was found out to be the poor crop production.
Farmers’ decisions to purchase the soil testing service were guided by expectations of
improving crop productivity and generate more income through selling those crops. This
expectation is more likely to influence the farmers’ satisfaction of the service. The findings
regarding income are similar to the findings by Zhang et al. (2009) which indicated that
perception on income determined the acceptance of the use of agricultural service. However,
not all farmers were able to purchase the service. There were barriers such as inability to pay
for the service because of poor marketing of the crops of the previous season. The privatized
soil testing services reduced the distance and the time to wait for the reports. However, there
are challenges in service delivery that affect the customer statisfaction. The research findings
revealed that farmers’ satisfaction is affected by the time the soil analysis report is delivered,
understanding of the soil analysis report, making use of the service, biophysical responses of
the crops after using the service and communication after the service delivery.
Farmers who got their reports on time expressed their satisfaction with the service they received.
However, those whose reports were delayed or never got their reports at all were disappointed
521
because some could not use what they purchased. The failure of some of the county
governments to deliver the reports affected the company’s reputation to the customers. Farmers
found that agro-dealers do not sell the recommended inputs. They felt disappointed when what
was recommended did not exist in the market or was too expensive for them. The findings are
in line with Glendenning et al. (2011) study, which revealed that less than half of those tested
soil in agro-clinics in India had followed the advice from the soil test results. However, this
challenge did not affect the farmers’ satisfaction of the company’s service. This might be
contributed by the fact that farmers’ did not associate the company’s service with agro-dealers
services. Farmers who purchased the services and they were able to apply the recommendations
shared their excitement on the service. It was then revealed that biophysical responses of the
crops affect farmer's satisfaction. Most of them whose crops grew faster and look healthy after
purchasing the soil test service, were satisfied with the services. Communication is the main
link between the service provider and the customers and has great potential to satisfy customers
when is effective. After service delivery farmers wanted to communicate with the service
provider, once they find it difficult, they become unsatisfied.
Implications
The study revealed the factors that affect the customer satisfaction in privatised extension
services. These factors have implication to the way the advisory services need to be delivered
by both government owned soil testing laboratories or by private companies. Private companies
can be considered as new players in the extension service delivery, especially in rural areas in
developing countries. Because of this reason, there is the need for these companies to
understand their customers. This paper tries to provide insights on how the companies can
satisfy farmers. By making sure that the services are delivered on time after purchase and
communication is maintained after the service delivery, they will most likely be able to satisfy
their customers. Moreover, it should be understood farmers are very much interested in positive
biophysiocal responses of the crops. Any advisory service whose fast crop growth and high
productivity are its ultimate goal will have higher chances to satisfy the farmers. In addition,
for private companies, partnering with existing organizations such as local government is good
service provision strategy. However, to reduce inefficiency brought by partnerships, roles
should be defined and tasks should be specified before partnering.This will enable the private
companies to prevent their reputation from being affected by the lack of accountability of other
partners.
Conclusion
As indicated in the introduction part of this paper, the private sector is currently emerging in
service delivery in many developing countries. Private companies have started to offer
extension services in rural areas, the services that used to be offered by the government. It is
522
important that these companies be successful in providing the services. The declining or
inefficiency of the government extension service delivery system calls for new players. The
private sectors are in a better position to offer the services because of their ability to access
new technologies and capacity to come up with new innovations comparing with governments.
Thus for the companies to keep their promises and communication with their customers after
the service delivery is an important aspects to ensure customer satisfaction.
References
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agricultural extension agents in kenya. Mediterranean journal of social sciences. Retrieved June
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communities in northern Tanzania. Agriculture, Ecosystems & Environment, 116(1-2), 47-59.
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agronomic service received in Ghana using the SERVQUAL model: A Case study of Kumasi
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metropolis. International Journal of Business and Social Science, 51-60. Retrieved May 15,
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Extension in Sub-Saharan Africa. The Journal of Agricultural Extension and Education,
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customer satisfaction model approach applied to Iranian Farmers. nternational Journal of
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Fertility Variability, Manure Application, and Cropping System. Better Crops, 95(1), 4-6.
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TRACK 9
Operations, Logistics/Supply Chain
Management, and Project
Management
525
526
An Analysis of Supply Chain Management Practices of Alcoholic Beverage
Manufacturing Firms in Ethiopia
Girum Mesfin Asrat

77441346@mylife.unisa.ac.za
Ozias Ncube
ncubeo@unisa.ac.za
Graduate School of Business Leadership (SBL)

University of South Africa, UNISA
Abstract
The poor implementations of supply chain management practices account for significant
inefficiency supply chain performance of manufacturing industries and reduced competitive
strength in developing countries. The aim of the study is to investigate which types of supply
chain management practices were implemented effectively in alcoholic beverage
manufacturing firms (excluding wine, beer and cedar). The supply chain management practices
that are taken into consideration were supply chain integration, sustainable supply chain
management and integrated management systems, early supplier involvement in new product
development, supply chain customer relationship management and information systems in
supply chain management. The focus of the study was to determine which types of supply chain
management practices have influenced the competitive strength of alcoholic beverage
manufacturing firms (excluding wine, beer and cedar). The alcoholic beverage (spirits and
liquors) firms were selected randomly. A self designed and pre-tested questionnaire with 35
items of questions was sent to 120 respondents (middle and top management members) from
alcoholic beverage (spirits & liquors) manufacturing organizations. Besides, the Cronbach’s
alpha reliability test was done to assure internal consistency of the scale. Thereafter, the data
analysis which is intended to determine the association between independent variables (SCM
practices) and dependent variable (competitive strength) was carried out using Chi-square test
and determination of symmetric measures of association Phi and contingency coefficient.
Finally, the most dominant SCM practice in alcoholic beverage (liquors and spirits) was
identified through application of factor analysis. The findings of the study show that the
dominant SCM practices in the alcoholic beverage(liquors and spirits) as listed from the
strongest to the weakest were sustainable supply chain management and integrated
management systems, early supplier involvement in new product development, supply chain
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integration, supply chain customer relationship management and information systems and
supply chain management. Moreover, the study further indicated that the dominant competitive
dimension between the alcoholic (liquors and spirits) manufacturing organizations was found
to be product quality.
Keywords: Ethiopia, supply chain integration, sustainable supply chain management,

integrated management system, early supplier involvement, new product development, supply
chain customer relationship management, information systems
1. INTRODUCTION
In order to overcome the market competition, organizations in dynamically changing

environment like in food and beverage sector shall use SSCM. According to (Beske, Land &
Seuring, 2013) SSCM is defined as ʺ the management of material, information and capital flows
as well as cooperation among companies along the supply chain while taking goals from all
three dimensions of sustainable development, i.e., , economic, environmental and social, into
account which are derived from customer and stakeholder requirements.” Therefore, the supply
chain management practices are the links to create dynamic capabilities which in their turn are
the potential capacities to improve performance. Dynamic capabilities are ʺ the capacity of an
organization to purposefully create, extend, or modify its resource base” and as such to reach
a higher economic value than their competitors (Beske, Land & Seuring 2013).
Further more, important supply chain management practices and decisions like new product
development, fast delivery of products and quality of information shared, JIT practices, etc.
need to be done with both members of supply chain coming from opposite ends( supplier and
end customer). The current market and economic condition has made it very challenging to
create competitive advantage with out giving due attention to integrate with supply chain
members. These integrations which are a result of global and local competition takes a frame
work that contains strategic orientation, supply chain continuity, collaboration, risk
management, pro-activity (Georgise, B. Klause-Dieter & Seifert 2014).
The food and beverage sector the alcoholic beverage sector in Ethiopia consist of National
alcohol and liquor factory as sole distiller and producer of different alcoholic beverages starting
from 15% to 45% volume by volume body strength. Having the next market share, competitive
strength and year of establishment, Super Eagle and Balezaf pure alcohol and liquors factory
takes the next lion share in Ethiopian alcoholic beverage manufacturing sector. As result of the
encouraging economic policies by Ethiopian government a pull of new entrants has joined the
alcoholic beverage (spirits and liquors) manufacturing sector.
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As these organizations use the same types of raw materials, plant and machineries and generic
distribution channels, they are implicitly exposed to supply chain inefficiencies conceded by
various supply chain management practices and decisions carried out by their own management
teams influencing their organizational competitive performance. This paper presents the results
of the investigation of the impact of supply chain management practices on the competitive
strength of alcoholic beverage (liquors and spirits) manufacturing firms in Ethiopia.
OBJECTIVES, RESEARCH QUESTIONS AND HYPOTHESIS
The general objectives of the research were to (1) investigate the impacts of supply chain
management decisions and practices on alcoholic beverage (excluding wines, beer and cedar)
manufacturing organizations in Ethiopia from the perspectives of firm’s competitive
performance, (2) investigate how these decisions and practices are related to performance of
the firms, (3) identify which types of supply chain management decisions and practices greatly
influence the aforementioned firm’s competitive strength. The specific objectives of the
research were to (1) to identify the important supply chain management practices in the
alcoholic beverage (excluding wines, beer and cedar) manufacturing organizations in Ethiopia
that significantly impact firm’s competitive strength, (2) to test whether these supply chain
management practices are associated with competitive strength of the alcoholic beverage
(excluding wines, beer and cedar) manufacturing firms in Ethiopia or not, (3) to investigate
which of these supply chain management practice have greatly influenced the firm’s
competitive strength, (4) to forward important recommendations in relation to identified supply
chain management practices which in their turn improve supply chain performance and
competitive strength across the alcoholic beverage (excluding wines, beer and cedar)
manufacturing sector in Ethiopia.
To examine the above objectives, the following research questions guided the investigation:
RQ1: What types of supply chain management practices are effectively implemented in the
local alcoholic beverage (liquors and spirits) manufacturing firms in Ethiopia?
RQ2: To what extent are these supply chain management practices associated with competitive
strength?
RQ3: Which type of SCM practice/s is more influential towards competitive strength of
alcoholic beverage (liquors and spirits) manufacturing firms in Ethiopia?
To evaluate the objectives and answer the research questions, the following testable hypotheses
were developed.
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Hypothesis 1: Supply Chain integration is associated with competitive strength of alcoholic
beverage (spirits & liquors) manufacturing firms.
Hypothesis 2: Early supplier involvement in the new product development process is positively
related to competitive strength of alcoholic beverage (spirits & liquors) manufacturing firms.
Hypothesis 3: Sustainable supply chain management and integrated management systems are
positively associated with competitive strength of alcoholic beverage (spirits & liquors)
manufacturing firms.
Hypothesis 4: Supply chain customer relationship management is positively related to

competitive strength of alcoholic beverage (spirits & liquors) manufacturing firms.
Hypothesis 5: The information systems in supply chain management are positively related to
The null hypothesis for all the above is that there is no relationship between the variables
investigated.
THEORETICAL AND EMPIRICAL LITERATURE REVIEW
Literature review
The theoretical foundation of the study originates from the assessment of literature related to
the performance of supply chains particularly in manufacturing industries of developing
countries. The alcoholic beverage manufacturing firms (excluding wine, beer and cedar) in
Ethiopia experienced reduced supply chain performance and poor competitive strength as a
result of ineffective implementations of supply chain management practices. Supply chain
management practices are defined as ʺ The set of activities that are undertaken by an
organization to promote effective management of its supply chain.ʺ (Dagne, Lanka & Rao
2014).Different challenges have been posed to the manufacturing industries in developing
countries like Ethiopia. Organizations used to take the price as primary tool and applied
different practices, like total quality management, business process re-engineering, to win the
market competition. However, many of them have fallen short of sustaining competitive
strength as the competition has shifted from price competition to the competition between
supply chains of different organizations (Bete Georgise, Klause-Dieter & Seifert 2014).
(Birhanu, Lanka & Rao 2014),further describe that the inability to implement supply chain
management practices in MIDC will account for about 10% of inefficiency out of the total
GDP of developing countries.
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3.2 Supply Chain Management Practices in the Ethiopian Alcoholic Beverage Industry
The traditional history of alcoholic beverages in Ethiopia starts from homebrewed products
known to be tella, tej and areki which are common traditional drinks.(Steinkraus, 1986). There
are also different types of cultural drinks which are characteristic of a given country world wide
Abegaz et al. (2003) and Kabak and Dobson (2011) (Yohannes ; Melak, ; Siraj , 2013).
According to the manufacturing business survey by the central statistics of agency of Ethiopia
in 2013, about 62% of manufacturing industries heavily depend on the imported raw materials
which cannot be substituted locally. The survey also notes that about the total of 427
establishments in manufacturing industry has indicated raw material shortage is the second
major reason for their production operations breakdown. The survey further describes that out
of 47 manufacturing organization in the beverage industry as a whole, 87% (41) of them should
have to import their raw materials from abroad. Therefore, the main raw materials for the
manufacturing of alcoholic beverages (liquors and spirits) that are different types of flavouring
materials are imported from foreign countries. Hence, it can be seen that it is important to
exercise appropriate supply chain management practices and decisions in achieving
competitive strength to win the competition.
Research Framework
The idea of supply chain management is derived from the main concept of a value chain
network which contains individual business functional units that are supposed to provide
resources and necessary information to attain the objectives of efficient management of
suppliers as well as the supply chain activities. Supply chain management includes approaches
and practices to effectively integrate suppliers, manufacturers, distributors and customers in
order to improve the long-term performance of the individual organizations and the entire
supply chain together with high-performing business models (Chopra, Meindl 2007). Supply
chain management involves effective anticipation of customer demand to avoid inefficiencies
by optimal allocation of resources and better management of materials, information and cash
flows. Even though there were sufficient amounts of literature on various dimensions of supply
chain management practices, there has not been common set of constructs on which one really
affects the organizational performance. Organizations in the current dynamically changing
business environment are carrying out various supply chain practices in order to establish
sustainable supply chain management. Supply chain management practices are defined as a set
of "activities that are undertaken in an organization to promote effective management of its
supply chains (Mensah, Diyuoh & Oppong 2014). The contribution of the beverage industry to
the GDP has increased in the past decades due improved trade and investment policies by the
Ethiopian government. According to the business statistics survey by central statistics agency
of Ethiopia (CSA) in 2013, the manufacturing industries contributed 20.43 billion birr to the
GDP. The major contribution goes to the manufacturing of food products followed by the
531
manufacturing of beverages having 21.28 and 10.01 shares respectively. Supply chain
management practices are defined as ʺthe set of activities that are undertaken by an organization
to promote effective management of its supply chain” (Birhanu, Lanka & Rao 2014). Different
challenges have been posed to the manufacturing industries in developing countries like
Ethiopia. This phenomenon has happened to be true due to increased pull of new entrants to
the industry there by increasing the strength of competitive pressure between organizations.
The following were identified as important in the investigation of the impact of supply chain
management practices on competitive strength of alcoholic beverage manufacturing firms in
Ethiopia. (1) identification of key supply chain management practices that are currently
implemented in developing countries like Ethiopia; (2) determination of relationship of these
supply chain management practices competitive strength of the firms; (3) investigation of the
influence of those identified supply chain management practices on competitive strength of
alcoholic beverage manufacturing firms in Ethiopia. Figure 1 presents the proposed theoretical
framework of the supply chain management practices and their impact on competitive strength
of alcoholic beverage manufacturing firms in Ethiopia.
Figure 1: Theoretical model of the Study
METHODOLOGY
532
Since the research is all about the impacts supply chain management practices on competitive
strength of alcoholic beverage (Liquors & spirits) manufacturing firms in Ethiopia, the
quantitative research design and survey research methodology using self-designed and pre-
tested questionnaire was applied in the research. The reliability test through determination
Cronbach’s alpha was done after which factor analysis was carried out in order to investigate
the strength of influence of supply chain management practices on competitive strength of
mentioned organizations. Random sampling technique was applied to select from the alcoholic
beverage manufacturing firms. The population consisted of workers with either a supply chain
responsibility and or affected by supply chain processes in each of the selected firm. A sample
size of 120 respondents was targeted.
RESULTS AND DISCUSSION
Out of 120 questionnaires that were sent to respondents 90 were returned correctly completed,
giving a response rate of 75%. The calculated Cronbach’s alpha value was 0.742 which is above
the targeted value of 0.7. The data analysis involved four stages:
In the first stage the test for sampling adequacy was conducted using Kaiser-Meyer-Olkin test.
Secondly, before the data collection has commenced and the questionnaire was finalized, the
Cronbach’s Alpha test was carried out to insure internal consistency of the measuring
instrument. Besides, the recoding of variables in to different variable has taken place in this
stage.
On the third stage, the Chi-square test together with directional measures of association
contingency coefficient, Cramer’s v and Phi were determined to know whether the dependent
and independent variable are related in hypothesis of the study.
Finally, the factor analysis was run to determine which type of independent variable (supply
chain management practice) that has greatly influenced the competitive strength of alcoholic
beverage (liquors and spirits) manufacturing organizations in Ethiopia.
After going through selection of population and sample size KMO and Bartlett’s test was done
in order to check whether the samples taken were adequate or not. The test value (0.560) is
greater than 0.5 indicating adequacy of samples.
Table 2 shows the Cronbach’s Alpha value as per dependent variables (supply chain
management practices) and independent variable (competitive strength).
Table 2: Summary of reliability tests per variable

533
Type of variable Number of Cronbach’s Remark
Items Alpha
1 Supply Chain Integration 6 0.737 Acceptabl

e
2 Early supplier Involvement in 4 0.736 »

New Product Development
3 Sustainable Supply Chain 6 0.735 »

Management
4 Supply Chain Customer 4 0.728 »

Relationship Management
5 Information Systems in Supply 4 0.750 »

Chain Management
6 Competitive strength 11 0.733 »
Total 35 742 »
The greater share of respondents belongs to the job title production line or sales supervisor
having 27.5% of respondents. The respondents with job title with team leader and purchasing
officer have taken nearly the same amount of respondents having 15.8% and 15% respectively.
Besides, a total of 70.3% of the respondents were part of the direct operations of marketing,
production and purchasing having the job titles branch manager, marketing /sales manager,
team leader, production manager, production line or sales supervisor, purchasing department
head and purchasing officer.
Hypothesis Testing
The five hypothesis containing supply chain integration, sustainable supply chain management
and integrated management systems, early supplier involvement in new product development,
534
supply chain customer relationship management and the use of information systems in the
supply chain were tested and are summarized in Table 3.
535
Table 3: Summary of results
Hypothesis Finding Conclusion and Implications
Hypothesis 1 Supply Chain integration is associated with competitive

Supply Chain integration is associated with
strength of alcoholic beverage (spirits & liquors) Reject Null Hypothesis
firm’s competitive strength.
manufacturing firms.
Hypothesis 2 Early supplier involvement in the new product development Early supplier involvement in the new
process is positively related to competitive strength of Reject Null Hypothesis product development process is positively
alcoholic beverage (spirits & liquors) manufacturing firms. related to firm competitive strength.
Hypothesis 3 Sustainable supply chain management and integrated Sustainable supply chain management and
management systems are positively associated with integrated management systems are
Reject Null Hypothesis
competitive strength of alcoholic beverage (spirits & liquors) positively associated with firm’s
manufacturing firms. competitive strength
Hypothesis 4 Supply chain customer relationship management is positively Supply chain customer relationship
Accept the Null
related to competitive strength of alcoholic beverage (spirits & management is negatively related to firm
Hypothesis
liquors) manufacturing firms. competitive strength
Hypothesis 5 The information systems in supply chain management are The information systems in supply chain
Accept the Null
positively related to competitive strength of alcoholic management are negatively related to firm
Hypothesis
beverage (spirits & liquors) manufacturing firms. competitive strength.
17TH INTERNATIONAL ACADEMY OF AFRICAN BUSINESS AND DEVELOPMENT CONFERENCE PROCEEDINGS – MAY 2016 536
Analysis of SCM Practices Impact on Competitive Strength
Factor analysis was conducted to identify the impact of each factor (practice) on competitive
strength. By applying principal axis factoring and Varimax with Kaiser Normalization methods
with factor loading of 50%, the factor analysis was carried out to identify the most potential
influencing SCM practice. Results are displayed in Table 4.
Table 4: Summary of factor Analysis of SCM practices against competitive strength
SCM Practice Result Degree of

influence (Rank)
(factor
loadings)
1 sustainable supply chain management and 0.789 Very strong (1st)

integrated management systems
2 Early supplier involvement in the new product 0.764 Strong (2nd )

development
3 The supply chain customer relationship 0.729 Strong (3rd )

management
4 supply chain integration 0.634 Medium(4th )
5 Supply chain information systems in supply chain 0.608 Medium(5th )

management.
DISCUSSION
The findings of the research were discussed correspondingly with derived research questions in
order to arrive at appropriate conclusions and recommendations.
RQ1: What types of supply chain management practices are effectively implemented in the local
alcoholic beverage (liquors and spirits) manufacturing firms in Ethiopia?
The identified SCM practices that are implemented in varying degree in the alcoholic
beverage(liquors and spirits) were supply chain integration, early supplier involvement in new
17TH INTERNATIONAL ACADEMY OF AFRICAN BUSINESS AND DEVELOPMENT CONFERENCE PROCEEDINGS - MAY 2016 537
product development, sustainable supply chain management and integrated management systems,
supply chain customer relationship management and information systems and supply chain
management. These were identified through an extensive literature review. This provided include
enough elements of questions under each variable in the preparation of the questionnaire. The
prepared questionnaire was pretested on sample respondents for further correction before data
collection.
RQ2: To what extent are these supply chain management practices associated with competitive
strength?
Supply Chain Integration:
Flyn et al. (2010) indicated that supply chain integration can be described as "The degree to which
a manufacturer strategically collaborates with its supply chain dimensions of SCI which are
supplier integration, customer integration and internal integration.ʺ The alcoholic beverage
manufacturing organizations in Ethiopia has been able to take steps that helped them bring internal
integration like establishment of different management systems like quality management systems
and performance management systems (balanced score card) in their organization. To some extent,
this has helped the organizations to improve internal efficiency enhancing organizational
performance. This was assured by the results of the research that indicate that there is a relationship
between supply chain integration and competitive strength. However, they lack the practices of
external integration with their respective suppliers that made this SCM practice not fully
implemented in the alcoholic beverage (liquors and spirits) manufacturing organizations hence
affecting supply chain performance. This is also verified in the result of the research by placing
the supply chain integration third according to the impact that it exerts towards competitive
strength of alcoholic beverage manufacturing organizations in Ethiopia.
Early Supplier Involvement in New Product Development:
The alcoholic beverage (liquors and spirits) manufacturing sector in Ethiopia is characterized by
the changing customer’s needs and preferences with regard to new flavours to local and
international customers. In order to achieve competitiveness the firms have indicated they
collaborative work with their suppliers to get customized flavours. Moreover, they let the suppliers
participate in the production of packaging bottles design for new products. The research finding
also assured that early supplier involvement is the second strong factor next to sustainable supply
chain management and integrated management systems that influenced competitive strength
through factor analysis. Furthermore, the relatively shorter life cycles of products of liquors and
spirits as a result of strong competition to satisfy customer’s needs and wants make the
manufacturing firms to find solutions by involving suppliers in their production processes.
Besides ,some organizations has been able to import turn-key technologies of distillation and
liquors bottling from specialized suppliers that helped them produce the highest quality pure
alcohol that is used for the production of liquors and spirits that ultimately satisfy their customers’
needs.
Sustainable Supply Chain Management and Integrated Management Systems:
The practices that already entertained in the participating organizations indicated that there existed
effective implementations of environmental management systems like EMS 14001-2004 and
quality management system ISO 9001-2008 towards achievement of organizational objectives. In
this regard, the organizations have been able to produce product with consistent quality to satisfy
customer’s needs. In addition to this they have invested significantly in waste treatment plants that
have helped them reduce the impacts of their production processes on the environment. The last
but not the least in SSCM is the perspective of supply chain flexibility and responsiveness in the
alcoholic beverage (liquors and spirits) manufacturing firms. Hence, the instances of process
flexibility like the one carried out by firms to protect the impacts of molasses shortage by replacing
it with the distillation of technical alcohol without deterioration of quality of pure alcohol
exemplifies the implementation of SSCM practice. Thus, this was assured through the result and
findings of the research. Moreover, the organizations in the alcoholic beverage industry were able
to gain continuous support for Ethiopian national cleaner production centre (NCPC) to achieve
resource efficiency in the production process.
Supply Chain Customer Relationship Management
Customer relationship management (CRM) is defined as the “process of managing detailed

information about individual customers and carefully managing all customer ʺtouch pointsʺ to
maximize customer loyalty” (Kotler and Lane2006). Moreover, the dimensions of relationships
with upstream customers (suppliers) were elaborated to comprise basic, ongoing and long term or
strategic partnership or relationship.
In this respect the organizations has practiced the supply chain customer relationships at certain
level. However, the relationships established were not on strategic level and planned basis.
Thus ,this also supported by the research result in accepting the null hypothesis stating that the
supply chain customer relationship management is negatively related to competitive strength.
Information Systems and supply Chain Management:
J.Bowersox, J.Closs & Cooper (2007) mention that the information systems in supply chain
management are the bridge that bound activities in to an integrated process. The integration is
characterized by four levels (1) management control (2) transaction systems (3) decision analysis
and (4) strategic planning.
The practices of information systems in supply chains as one of SCM practices in the alcoholic
beverage sector (excluding wines, beer and cedar) manufacturing was found to be at its bottom
level. The limited amount of information was exchanged through the traditional means other than
the digitalized management information systems. The levels of integration, management control,
transaction systems, decision analysis and strategic planning were not enabled through the
applications of appropriate information systems. Hence, this has made the participating supply
chain members not to effectively enter in to the international market and reduced the capacity of
the firms to reach their customers. This was entirely supported by the finding of the research
through validation of the null hypothesis which said ‘the information systems in SCM are
negatively related to competitive strength and rejection of the alternative hypothesis that states ‘the
information systems in SCM are positively related to competitive strength’.
RQ: 3 which type of SCM practices are more influential towards competitive strength of alcoholic
beverage (liquors and spirits) manufacturing firms in Ethiopia?
The Impacts of SCM Practices towards Competitive Strength:
Through the application of the factor analysis of SCM practices, it was found that the most
dominant SCM practice in the alcoholic beverage (liquors and spirits) manufacturing sector is the
sustainable supply chain management and integrated management systems. Thus, this was
indicated in the study with higher values of factor analysis with factor loadings of 0.5. Next, the
second most important SCM practice that significantly impacted the competitive strength of the
organizations under concern is early supplier involvement in new product development. Moreover,
the increased impacts of sustainable supply chain management and integrated management
systems and early supplier involvement in new product development has been reflected also in
making the product quality as the most competitive tool between the organizations. The degree of
influence starting from the strongest to weakest is as follows:
Sustainable supply chain management and integrated management systems
Early supplier involvement in new product development
Supply chain integration
Supply chain customer relationship management
Information systems and supply chain management
Summary of the research findings:
The most dominant SCM practice that impacted the competitive strength of alcoholic beverage
(liquors and spirits) manufacturing organizations is sustainable supply chain management and
integrated management systems. On the other hand the dimension of competitive strength that
these organizations are currently competing on was product quality. Figure 2 summarizes the
results and presents the degree of impact of each supply chain management practice on competitive
strength of alcoholic beverage (spirits and liquors) manufacturing firms in Ethiopia.
Figure 2: Summary of research findings
RECOMMENDATIONS AND CONCLUSION
The following section presents recommendations, conclusions and implications of the research.
7.1 RECOMMENDATIONS
The final objective of the investigation was to make important recommendations that will help the
alcoholic beverage (liquors and spirits) manufacturing firms in Ethiopia to implement effectively
the identified supply chain management practices and ensure competitive strength in the chosen
market.
Supply Chain Integration
The improvement of supply chain performance as well as enhancement of competitive strength

requires effective integration of internal and external operations. In order to achieve this, the
alcoholic beverage (liquors and spirits) manufacturing organization may have to do the following:
Build better data base in order to facilitate the supply chain integration of organizations.
Create cross organizational teams that let the organizations to work more collaboratively to solve
problems, particularly between government owned and private organizations.
Analyse their value chain in order to avoid non-value adding activities to improve supply chain
performance.
Reduce bureaucratic bottle necks that hinder supply chain integration.
Moreover, the industry is characterised by the major imports of raw materials from abroad to
produce liquors and spirits. More often, this issue was observed conceding production down times
which are significant with regard to profitability. Therefore, the supply chain members should have
to see alternatives that will reduce the problems through vertical and horizontal integration.
Early Supplier Involvement in New Product Development
The alcoholic beverage (liquors and spirits) sector in Ethiopia is characterized by the dynamically
changing needs and preferences of customers. In addition to this, the potential local and export
market is becoming more promising such that new multi-national companies are entering in to
Ethiopian market. Therefore, in order to withstand this competitive pressure, the alcoholic
beverage (liquors and spirits) manufacturing in Ethiopia needs to take into account the following
recommendations with regard to ESI:
Properly identify the point at which the supplier involves in new product development
Identify key suppliers that have better capacity in order establish long term partnership to improve
the effectiveness of early supplier involvement in new product development.
Consider the supplier development as one opportunity to reduce operational break down and
improve product quality
Strengthen the research development activity to make product development core competency.
Sustainable Supply Chain Management and Integrated Management Systems
Sustainable supply chain management and integrated management systems are the one which is
more effectively SCM practice in the alcoholic beverage (liquors and spirits) manufacturing of
Ethiopia. However, there are also important dimensions that need to be considered by the
organizations with regard to sustainable supply chain management. The following is a list of
recommendation with regard to SSCM:
Work collaboratively with the community at large in order to effectively collect and recycle the
solid wastes like pet bottles.
Give more attention to corporate social responsibility and social marketing that enhance improved
environmental performance.
Implement important integrated management systems like ISO-17025 laboratory management

system, and HACCP 23000 food safety to penetrate more into global market and increase customer
confidence.
Make technological substitution of old production machineries to further reduce raw material
wastage and improve productivity.
Supply Chain Customer Relationship Management
The traditional supply chain customer relationship management in the alcoholic beverage
manufacturing organizations in Ethiopia has made firms not to exploit advantages from suppliers.
In order to do this, the organizations need to get out of the traditional practices by implementing
the following recommendations:
Segment their suppliers in accordance with frequency of purchase, order specificity and strategic
importance of purchased item.
Revise their old manuals according to the new concept of supply chain customer relationship
management to avoid unnecessary drawbacks.
Establish fruitful long term relationships with few selected suppliers
Strengthen the supply relationships with downstream customers to reduce cycle time of the order
fulfilment process.
Information Systems and supply Chain Management
The current globalization of markets is requiring efficient product delivery to increase market
reach to customers. In such a case, the use of information systems in the supply chain plays critical
role in satisfying customers with increased flexibility and reduced cost. Therefore, the alcoholic
beverage (liquors and spirits) manufacturing organizations should have to pay attention to use of
information systems as enablers of their supply chain performance.
Moreover, the alcoholic beverage (liquors and spirits) manufacturing organizations are carrying
out significant amounts of transactions while selling products to their customers through their
distribution channels. Meanwhile, the channel management is ineffective and exposed to
corruption. Therefore, the firm’s shall consider the implementations of TPS(transaction processing
systems) and point of sale solutions(POS) to better inventory management ,reduce delivery cycle
time and protect wastage of resources.
CONCLUSION
Some of the alcoholic beverage(liquors and spirits) manufacturing organizations in Ethiopia that
are established in the early years of 1980’s were age old in their production machineries and the
market was monopolistic in which there are a few alternative products for customers. However, as
a result of encouraging trade and investment policies by Ethiopian Government, this trend has been
reversed and new potential entrants have joined the industry. This has culminated with visible
introduction of new technologies thereby making the competition very strong. As a result of
increasing pressure from local and international competitors, the firms’ were able to understand
the importance of SCM practices and started implementation them accordingly. However, there
still remains the gap of implementation of SCM practices in the manufacturing of alcoholic
beverage (liquors and spirits) organizations in Ethiopia particularly in information systems in
supply chain management and supply chain customer relationship management to enhance the
competitive strength.
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An Empirical Dynamic Sensitivity Analysis Approach for Managing

Development Project Operations and Supply Chain Risks
Chris I. Enyinda
Department of Marketing and International Business, Canadian University Dubai, UAE
christian@cud.ac.ae
Chris H. Mbah
School of Business and Entrepreneurship, American University of Nigeria, Nigeria
dr_cmbah@yahoo.com
Abstract
Managing risk in international development project operations and supply chains is vitally
important for World Bank’s mission and for recipients of its projects and programs. In addition,
managing risk is imperative for international donors that make funds available for development
projects and programs in developing countries. For project managers, inability to identify sources
of risk attached to development projects and programs will result in missed opportunities and
escalation in poverty. It can also constrain international donors from future donations to
developing nations in dire need of development projects. Purposeful management of risks in
development project operations and supply chains is the lychpin of successful projects which in
turn begets awarding of additional projects. Although in spite of the growing menace of risk and
uncertainty in development projects, project managers have little or no knowledge of how to
identify and manage existing and emerging project operations and supply chain risks. We examine
existing risk management practices in development projects and project management literature.
We quantify portfolio of risks in project operations and supply chains using sensitive analysis-
based expert choice software. We conclude by evaluating whether or not the ranking of the project
risk management strategies remain the same (insensitive/robust) or sensitive after changing or
perturbing corruption risk (the most important risk for project managers).
Key Words: The World Bank, Project Operations, Supply Chains, the AHP, Risk Management
1 Introduction
For over five decades, the World Bank has been sponsoring relevant development projects in
Nigeria to induce sustained economic development and poverty alleviation. The sponsored
projects and programs range from agriculture, education, power, medical, malaria control booster,
transportation infrastructure, electricity transmission, telecommunications to water supply. These
projects are worth multi-millions of dollars. And successful completion and delivery of these
projects relies on efficient and effective operations and supply chain management. Hillson (2003,
p. 3) asserts “the purpose of project [operations and supply chain] management is to act as a change
agent, delivering a change to the status quo, and achieving this in a controlled and managed way.”
Thus, operations and supply chain management is central to delivering and meeting project
objectives in terms of time, cost, quality, scope, and performance. Essentially, it is the backbone
of every successful projects that serve the needs of the society. In short, no efficient and effective
operations and supply chain management, no successful project management. Asbjørnslett (2002,
p. 93) argues “project supply chain management seeks value enhancement in projects through
…demand and supply… [that is] met through the characteristics of logistics throughout the project
life cycle with an agile approach to demand chain management in the development phase and a
lean approach to supply chain management in the operations phase. Thereby meeting the need for
value enhancement through engineering and the supply chains contribution in developing demand
for the project object, and creating value through cost efficiency in the operations supply chains.”
Vrijhoef and Koskela (2000) describe the roles of supply chain management in construction
(project) as follows: 1) the focus is on the impact of supply chain on project site activities in order
to reduce cost and duration of project site activities, ensuring dependable material and labor flows
to the site to avoid disruption to the workflow, and the relationship between the site and direct
suppliers; 2) the focus is on supply chain that is necessary to reduce costs associated with logistics,
lead-time and inventory; 3) the focus is on moving activities from the protect sites to the earlier
stages of the supply chain and to reduce total cost and duration, and 4) focusing on the integrated
management and supply chain improvement and the project production.
Project management plays an important role in project success (Munns and Bjeirmi, 1996).
However, project management cannot successfully contribute to project objectives without
adequately managing the known-unknown project operations and supply chain disruptive risks.
Indeed, recently, risk and risk management has been the subject of serious discussion at the World
Bank because of time, budget over-run, and rampant bribery and corruption linked to the
development projects. Hence the inability to manage the prevalence of existing and emerging risk
portfolio can result in “…significant obstacles to attaining the World Bank Group’s two primary
goals: ending extreme poverty by year 2030 and boosting shared prosperity of the bottom 40
percent of the population in the developing countries (World Bank Report, 2014). In agreement
with the World Bank, managing risk effectively is exceedingly paramount as it can be a powerful
instrument for economic development and poverty alleviation.
The AHP model developed by Saaty (1980) is used to quantify and manage risk in development
projects in which the goal being pursued has multiple and conflicting objectives. The portfolio of
project operation and supply chain risks to identify and mitigate are both qualitative and
quantitative in nature. In addition, choosing the best risk mitigation options is equally conflicting.
As a multi-criteria decision making process, the AHP supports decision makers or a group of
decision makers to set priorities and deliver the best decision when both quantitative and
qualitative aspects of a decision must be considered. The AHP encompasses three basic functions,
including structuring complexity, measuring on a ratio scale, and synthesizing. Furthermore, the
AHP advantages includes its reliance on easily derived expert opinion data, ability to reconcile
differences (inconsistencies) in expert judgments and perceptions, and the existence of Expert
Choice Software that implements the AHP (Calantone et al. 1989).
The AHP-based sensitive analysis (SA) is used to examine the sensitivity of the alternatives cum
their ranking to changes in the major objectives’ priorities. For the project operations and supply
chains risk management, the AHP-based dynamic SA approach is deployed to perform SA on the
weights of the decision criteria or objectives and the performance values of the alternative risk
options expressed in terms of the decision objectives. SA represents one of the methods used in
risk management evaluation when values of the coefficients are subject to variation (Rappaport
1967). The AHP allows SA of various objectives, thus helping decision makers investigate the
effects of making different assumptions about the relative importance of different criteria (Dunlop
et al. 2004). Erkut and Tarimcilar (1991) assert that SA can be a relevant tool in eliminating
alternatives, enhancing a group decision making process and/or in providing actionable
information as to the robustness of a decision. According to Rapport (1967), SA “tests the
responsiveness of model results to possible variations in parameter values, and thereby offers
valuable information for appraising the relative risk among alternative course of action.” Insua
(1990) notes that SA can provide a sensitivity measure and recommend means to improve on the
current condition, identify critical judgments, utilize only available known information, and be
palatable to implement.
The remainder of the paper is structured into four main sections, beginning with a review of the
relevant literature on risk and sources of project operations and supply chains risk and project risk
management. This section is followed by a discussion on sensitivity analysis. Research
methodology is presented in the third section. Section four discusses data collection and analysis.
Results are presented and discussed in section five. Conclusions/ managerial implications are
discussed in the final section.
2 Literature Review
2.1 Risk and Sources of Project Operations and Supply Chains Risk
Risk has been defined in a variety of ways. The PMBOK (2004) view risk as an uncertain event
or condition that, if it happens, has a positive or negative impact on a project’s objectives. Risk is
an exposure or a probability of loss (gain)/ruin or a barrier to achieving success (Jaafari, 2001;
Mullins et al. 1999; Miles and Wilson, 1998; Hertz and Thomas, 1994). Risks can potentially
disrupt the ability of project managers meeting or fulfilling the project objectives and tasks may
be prolonged more than planned with more negative consequences (Kutsch, 2010; PMBOK, 2004).
Given the disruptive nature of unidentified risks to project objectives (PMBOK, 2004) declared
risk management as one of its nine key knowledge areas in project management. Project risk
denotes any uncertainty that affects one or more project objectives (WSDOT, 2014). Projects by
nature face a number of risks. “Risk as a quintessential part of international development projects
and/or programs is uncertain and multidimensional” (Enyinda et al. 2012, pp. 372-379). Hillson
(2003) states “like everything else in life, all projects are inevitably subject to uncertainty” and
risk. Thus, projects are not immune from risk. Identifying and understanding the sources of project
risks enable project managers to meet or satisfy end-users or society service expectations.
To properly manage risks in project operations and supply chains, sources of existing and emerging
risks must be carefully identified. Therefore, understanding potential risks and uncertainties is at
the heart of project operations and supply chain management. Otherwise, the intended project
operations and supply chain management objectives will not be achieved. Flyvbjerg et al (2003)
assert that mega projects often lead to cost overrun, schedule delays, and worst project terminations
because risks are not properly identified. PMBOK (2013) attests that project risk is composed of
threats to the project’s objectives (negative outcomes) and opportunities to improve on those
objectives (positive outcomes). Risk factors attached to projects influence the time, budget, and
quality performance of the project (Akintoye and Macleod, 1997). Risk identification entails
determining which risks will likely affect the project and then documenting their characteristics
(WSDOT, 2014). Risk exists in every project and the sources must be identified and evaluated
frequently throughout the life cycle of the project (PMBOK, 2013). For uncertainty that confronts
a project, PMBOK (2013) describes it an uncommon state of nature that is characterized by
absence of information associated with a desired outcome.
For internal sources of risk and uncertainties, Hillson (2003) suggests that they can emanate from
the changing requirements on the project to be done or scope of work, people involved in the work,
productivity rates, supply chain members’ performance, and use of new technology or novel
approaches and methods. For the external sources, they include the environment in which the
project is undertaken, market conditions, competitors’ actions, changing exchange rates or
inflation rates, weather conditions, or other stakeholders in the project who are able to influence
the performance (Hillson, 2003) negatively or positively. Natural environment include physical
environment, facilities/sites, local services; Cultural (e.g., political, legal/regulatory, interest
groups); economics (e.g., labor market, labor conditions, financial market); technology
requirements (e.g., scope uncertainty, complexity, conditions of use) (Hillson, 2003). PMBOK
(2008) classified risks into technical, external, organizational, environmental, or project
management.
Some of the risks sources associated construction project activities that are capable of impacting
projects performance by way of time, budget, and quality include acts of God, physical,
environmental, design, job site-related, logistics, economic and financial, legal, political and
environmental, construction and operation risks (Mustafa and Al-Bahar, 1991; Perry and Hayes,
1985). Kwak (2002) identified risk factors in international development projects, including
political, legal, cultural, technical, managerial, economic, environmental, social, corruption, and
physical aspects. Kwak and Smith (2009) examined budget and schedule risks attached to mega
defense acquisition projects. Environmental factors affecting international projects are economic,
legal and political, security, infrastructure, culture, and geography (Gray and Larson, 2008). “The
risks in the supply chain can be mitigated if the members of the chain understand the risks and risk
mitigations which have impact on risk management in the supply chain. Risk sources of the chain
should be identified according to all the members of the chain. It is also important for the members
of the chain to understand that their risk susceptibility is dependent on other constituents of their
supply chain” (Astuti et al. 2013). Viswanathan (2015) categorized scope, scheduling, technology,
and resources as project risks.
2.2 Project Risk Management Strategies (Response Options)
Predictive project risk management is important to attaining successful project management.

Because project risks that get identified and measured get managed. A number of authors have
examined and recommended a number of ways to manage risks in projects (e.g., Enyinda and
Obuah, 2015; Enyinda et al. 2013; Khalili and Maleki, 2011; Perminova et al. 2008; Olsson, 2007;
Chapman, 2006; Chapman and Ward, 2004; Ward and Chapman, 2003; Barber, 2005; Dvir et al.
2003; Hillson, 2002; Raz and Michael, 2001; Tah and Carr, 2001; Klein and Cork, 2001; Baccarin
and Archer, 2001; Ward, 1999; Baldry, 1998; Chapman, 1997; Williams, 1994). PMBOK (2013,
p. 309) defines Project risk management as “the processes of conducting risk planning,
identification, analysis, response planning, and monitoring and control on a project.” Project risk
management is the lychpin of project management and must be at the center of the Bank’s
sponsored project and program management processes. Thus, predictive project risk management
can lead to a successful project management that can “…deliver value to project parties (clients,
consultants, contractors, subcontractors, etc.) and other stakeholders (users, investors,
communities affected by the project…” (Primo and Filho, 2012). Project risk management offers
a number of values to projects (WSDOT, 2014): It 1) recognizes risk and uncertainty and provides
forecasts of possible outcomes or consequences, 2) produces tangible project outcomes via better
informed decision making, 3) has a positive impact on creative thinking and innovation, 4)
generates much better project control in terms of reducing overhead and time, and improvement
on benefits to stakeholders, and 5) contributes to project objectives and success.
Some of the methods or risk management strategies include mitigation/reduction, transfer/share,
avoid, and accept/retain. These risk management strategies have been used in a number of
empirical studies (e.g., Enyinda and Obuah, 2015; Enyinda et al. Backhar, 2013). Risk avoidance
response strategy involves eliminating the threat by eliminating the cause or changing the project
scope to eliminate the threat; clarifying requirements, obtaining information, improving
communication, or acquiring expertise (PMBOK, 2013). Risk transfer response strategy is owned
and managed by a third party (e.g., insurance) assuming the risk (PMBOK, 2013). Risk transfer
usually entails payment of a premium to another party, and the cost-effectiveness of this must be
considered when deciding whether to opt for a risk transfer management strategy (Hillson, 2013).
Risk mitigation/reduction response strategy entails reducing the probability and/or impact of an
adverse risk event to an acceptable level or threshold. Proactive strategy is more effective than
reactive strategy (PMBOK, 2013). Risk absorption response strategy is used when the decision-
maker knows about the risk, but decides to accept the consequences if failure occurs (PMBOK,
2013. The decision-maker retains or accept the risks for which response is not cost-effective are
accepted; risks that are uncontrollable (no response actions are practical) are also accepted (Hillson,
2013).
3 Sensitivity Analysis
Rappaport (1967) assert that in the face of risk and uncertainty, the most recurring questions to be
answered by organizations are of the form, “what if”? “What if” analysis or the so called SA is a
technique used to assess how possible changes in parameter values impact model outputs and helps
to facilitate a better understanding of risk (Rappaport 1967). SA is a means of investigating the
impact of reasonable changes in base-case assumptions (Eschenbach 1992) or an approach which
allows decision makers to explore the impact on the optimal decision(s) of potential changes in
any of the problem variables (Trueman 1974). Some of the uses of SA include determining the
impact on the ranking of alternatives of changes in various model assumptions, making better
decisions, deciding which data estimates should be refined before making a decision, and enabling
management to focus attention on the most critical elements during decision implementation
( Kirkwood 1997; Eschenbach 1992).
Rappaport (1967) contend that from the humble beginning of business development that decision
makers have leveraged SA tests for evaluating relative risk of alternative courses of action.
Triantaphyllou and Sanchez (1997) argue that “often data in multi-criteria decision making
(MCDM) problems are imprecise and changeable.” As a result, an essential step in many uses of
MCDM such as AHP is to execute an SA on the weights of the decision objectives and
performance values of the alternative options expressed in terms of the decision objectives
(Triantaphyllou & Sanchez 1997). Samson (1988) suggests that SA is an important part of decision
making process thinking in real time and generally entails checking the effects of the model
assumptions on the model solution. Because of SA’s importance in decision making, it has been
applied in such areas as pharmaceuticals, medicine, civil engineering, political science and
computer science (Steenland and Greenland, 2004; Blake et al. 1988; Castillo et al. 2006).
4 Methodology
AHP is a multi-criteria decision making method that supports decision-makers confronted with a
complex problem with multiple conflicting and subjective criteria. AHP allows decision-makers
to model a complex problem in a hierarchical structure, showing the relationships of the overall
goal, criteria (objectives), sub-criteria, and alternatives. There are four steps required in AHP
development, including problem modeling, weights valuation, weights aggregation and sensitivity
analysis.
4.1 Application of AHP to Managing Development Project Operations and Supply Chain Risk
A typical AHP is composed of the following four-phases. 1) Construct a hierarchy that describes
the problem. The overall goal is at the top of the structure, with the main attributes on a level below.
2) Derive weights for the lowest-level attributes by conducting a series of pair-wise comparisons
in which each attribute on each level is compared with its family members in relation to their
significance to the parent. However, to compute the overall weights of the lowest level, matrix
arithmetic is required. 3) The options available to a decision maker or a group of decision makers
are scored with respect to the lowest level attributes. Similarly, the pair-wise comparison approach
is used. 4) Adjusting the options’ scores to reflect the weights given to the attributes, and adding
the adjusted scores to produce a final score for each optimum (Roper-Lowe and Sharp, 1990).
4.2 AHP Algorithm Steps
First, define an unstructured problem and determine the overall goal. According to Simon (1960),
the methodology of decision-making process encompasses identifying the problem, generating and
evaluating alternatives, designing, and obtaining actionable intelligence. Figure 1 reports on
hierarchical structure of the attributes (development project operations and supply chain risk). The
overall goal of is depicted in the first level of the hierarchy. Second, build the hierarchy from the
top through the intermediate levels (criteria on which subsequent levels depend on) to the lowest
level, which usually contains the list of alternatives. The major criteria or attributes identified
include legal and political risk (LEPR), corruption risk (CORR), social-cultural risk (SOCR),
supply chain risk (SUCR), organizational risk (ORGR), and physical Risk (PHYR). The risk
management alternatives include risk reduction/mitigation, risk absorption, risk avoidance, and
risk transference. Third, construct a set of pair-wise comparison matrices for each of the lower
levels. The pair-wise comparison is made such that the attribute in row i (i = 1, 2, 3, 4…n) is ranked
relative to each of the attributes represented by n columns. The pair-wise comparisons are done in
terms of which element dominates another. These judgments are then expressed as integer values
1 to 9 (e.g., aij = 1 means that i and j are equally important, aij = 3 signifies that i is moderately
more important than j, aij = 5 suggests that i is strongly more important than j, aij = 7 indicates
that i is very strongly more important than j, and aij = 9 signifies that i is extremely more important
than j.
Development Project Operations &

Supply Chains Risk
LEPR CORR SOCR SUCR ORGR PHYR
Risk Risk Risk Risk

Mitigation Absorption Avoidance Transference
Figure 1: hierarchical structure of the attributes.
4.3 Establishment of Pairwise comparison matrix A
The pair-wise comparisons are accomplished in terms of which element dominates or influences
the order. We used the AHP to quantify experts’ opinions depicted as an n-by-n matrix as follows:
 w1 / w2 w1 / w2 ... w1 / wn   1 a12 ... ain 
w / w w2 / w2  
... w2 / wn  1 / a12 1 ... a 2 n 
 2 1
 . . . .   . . . . 
   
 . . . .   . . . . 
 . . . .   . . . . 
   
 wn / w1 wn / w2 ... wn / wn  1 / a1n 1 / a 2 n ... 1 
A=[aij]=wi/wj = =
If ci, is judged to be of equal importance as cj, then (aij) = 1; If ci, is judged to be more important
than cj, then (aij) > 1; If ci, is judged to be less important than cj, then (aij) < 1; (aij) = 1/aji, (i, j =
1, 2, 3, …, n), aij ≠ 0.
5 Data source and Discussion
Data were collected from April 14 – 18, 2013 during an executive training of a group of 25 project
managers on result-based approach to project operations and supply chain risk assessment in Dubai,
UAE. They were charged with managing wide range of the World Bank international development
projects and programs across Nigeria. A combination of questionnaire survey and brainstorming
technique were used to obtain participants’ expert opinions on the sources of project procurement
and supply chain operation risks prevalent in development projects in Nigeria. Brainstorming is
one of the techniques often used in identifying sources of risks in project management.
Brainstorming techniques entails getting subject matter experts, project team members, risk
management team members and other stakeholders participate in identifying potential risks.
Heldman (2004) contends that the existence risk can disrupt project completion or meeting project
goals and objectives. The list of risks attached to project operations and supply chain identified
during the brainstorming session were corruption, political, social, legal, cultural, design, technical,
organizational, economic, environmental, physical, external, institutional, funding, infrastructure,
project management, procurement, security, project site-related, and act of nature. However, the
major risks considered in this research include legal/political, corruption, social-cultural, supply
chain, organizational, and physical. Based on the thorough review of literature and the expert
opinions of the project managers, we developed a questionnaire based on Saaty’s (2008) AHP.
They provided response to several pair-wise comparisons, where two categories at a time were
compared with respect to the goal. We used the results of the questionnaire survey as input for the
AHP. It took total of 15 judgments (i.e., 6(6-1)/2) to complete the pairwise comparisons of the
major objectives or major risk criteria shown in Table 1. To derive estimates of the criteria
priorities, we used the data reported in the matrix. The priorities provide a measure of the relative
importance of each criterion. The AHP Expert Choice Software is used to analyze the data reported
in Table 1.
Table 1: Major Risk Criteria Pairwise Comparison with respect Goal
LEPR CORR SOCR SUC ORGR PHYR

R
Legal/Political Risk (LEPR) 1 1 1 5 5 1
Corruption Risk (CORR) 1 1 3 9 9 3
Social/Cultural Risk (SOCR) 1 0.333 1 3 5 1
Supply Chain Risk (SUCR) 0.2 0.111 0.333 1 1 0.143
Organizational Risk (ORGR) 0.2 0.111 0.2 1 1 0.143
Physical Risk (PHYR) 1 0.333 1 7 7 1
Sum 4.4 2.888 6.533 26 28 6.286
6 Result and Discussion
Figures 2 report the priorities of major project operations and supply chains risk factors and
response strategies for managing the same. Corruption risk is the most important project operations
and supply chain risk affecting international development projects, followed by legal and political
risk. This is consistent with Burkil’s (2013) statement that “the scale and complexity of
many…projects, together with the number of parties participating, the geographic locations where
they are performed and the legal systems to which they are exposed can make them especially
prone to bribery and corruption.” Similarly, development projects suffer delays or complete
termination due to “the size and scope of development projects, often with intricate supply chains,
numerous contractors and project phases, and significant government involvement, increase the
risk of bribery, corruption and fraud” (Pop, n. d). With respect to Figure 2 bottom panel, risk
avoidance is the most important response to corruption, followed by mitigation/reduction.
2/29/2016 2:33:45 PM Page 1 of 1
Model Name: Managing Risk in International Development Project Operations and SC
Treeview
Goal: Managing Risk in International Development Project Operations and

Supply Chains in Nigeria
Legal/Political Risk (LEGR) (L: .209)
Corruption Risk (CORR) (L: .369)
Social/Cultural Risk (SOCR) (L: .157)
Supply Chain Risk (SUCR) (L: .038)
Organizational Risk (ORGR) (L: .035)
Physical Risk (PHYR) (L: .193)
Alternatives
Risk Avoidance .402

Risk Absorption .138
Risk Mitigation .373
Risk Transfer .088
Figure 2: Composite Priority of Project Risk and Risk Response Strategy
6.1 Sensitivity Analysis Results
Per Fiacco (1983), SA determines the effect of local perturbation over results and stability analysis
as the effect of finite perturbation over results behavior. If a decision maker or a group of decision
makers believe that an attribute might be more or less important than originally indicated, that
attribute's bar can be dragged to the right (increase) or left (decrease) to observe the impact on
alternatives. Thus, the objective of SA in project operations and supply chain risk mitigation is to
* Ideal mode
determine how small changes (perturbation) utxepin input parameters, such as the three important risks
(fuel price risk, and demand risk) will influence the ranking of the risk mitigation options
(alternatives). Figures 3-4 show the dynamic sensitivity graphs of the alternatives’ priorities with
respect to the most important risk - corruption risk. The right hand side panel of figure 3 shows
the ranking as: risk mitigation > risk avoidance > risk absorption > risk transfer. In figure 4,
decreasing corruption risk by 10% did not result in changes in the ranking. Therefore, ranking of
the risk management options are insensitive or robust. Similarly, decision makers can examine
what will happen if corruption increases by 10%. Similarly, we can perform dynamic SA for the
legal and political risk, closest risk to corruption risk.
Dynamic Sensitivity for nodes below: Goal: Managing Risk in
International Development Project Operations and Supply Chains in
Nigeria
3/4/2016 10:16:06 PM Page 1 of 1

Objectives
Figure 3: Original Dynamic SA NamesPriorities and Project
for Major
Dynamic Sensitivity for nodes below: Goal: Managing Risk in
International
Legal/Politi Development
Legal/Political Project Operations and Supply Chains in
Risk (LEGR)
Risk Response Strategy Nigeria
Corruption R Corruption Risk (CORR)
Social/Cultu Social/Cultural Risk (SOCR)
Supply Chain Supply Chain Risk (SUCR)
Organization Organizational Risk (ORGR)
Physical Ris Physical Risk (PHYR)
Alternatives Names
Risk Avoidan Risk Avoidance

Risk Absorpt Risk Absorption
Risk Mitigat Risk Mitigation
Risk Transfe Risk Transfer
Objectives Names
Figure 4: Dynamic SA for Corruption Risk: Scenario 1
Legal/Politi Legal/Political Risk (LEGR)
Corruption R Corruption Risk (CORR)
Social/Cultu Social/Cultural Risk (SOCR)
7 Conclusion and Managerial
Supply Chain Implications
Supply Chain Risk (SUCR)
utxep
Organization Organizational Risk (ORGR)
Risk management objectives are designed to reduce the number of surprise events, minimize the
Physical Ris Physical Risk (PHYR)
consequences of adverse events, as well as maximize the results of positive events. Some of the
Alternatives
advantages of risk analysis include greater Names available during the course of planning and
information
decision making, project objectives and verifications, better communications, better probability
Risk Avoidan Risk Avoidance
that project realization will be optimal, and increased chance of overall project success. The
Risk Absorpt Risk Absorption
Risk Mitigat Risk Mitigation
Risk Transfe Risk Transfer
disadvantages include belief that all risks have been accounted for and project could be shut down.
Project managers who manage portfolio risk effectively and efficiently will avoid cost overrun,
enhance greater productivity, and meet project objectives. Project risk management in the context
of international development entails a comprehensive and systematic manner of identifying,
analyzing and responding to both existing and emerging risks to meet project objectives. In order
to proactively and responsively manage project operations and supply chains risk, project
managers must endeavor to understand risk sources.
For the project managers managing the World Bank international development projects and
programs, this research offers important insights on how to proactively and effectively mitigate
risk in development project operations and supply chains. Arguably, this research will provide
project and program managers with more predictive methodology to evaluate and quantify risks
that can disrupt project objectives. SA can be of benefit to the World Bank’s projects and programs
managers by suggesting which project risk management response options have the most impact on
project operations and supply chain risks. According to Min (1994), “the sensitivity analyses are
necessary because changing the importance of criteria requires different levels of resource
commitment …”
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Factors Affecting Risk Management in IT Projects – A Case o Public Sector
Organisations in South Africa
Blessing Javani
University of South Africa, Graduate School of Business Leadership, Midrand, South Africa
javanib@yahoo.com
P. D. Rwelamila
University of South Africa, Graduate School of Business Leadership, Midrand, South Africa
rwelapd@unisa.ac.za
Abstract
The purpose was to study the influence of experience on risk management on aspects which
include knowledge base, current projects and project clients in IT projects. Literature is abounding
with evidence that risk management is being subtly applied in IT projects. The research sought to
establish if in instances it is applied, does risk management aspects differ according to years of
experience in either risk management or IT project management. A survey design was adopted for
the study with a questionnaire as a data collection tool. The population consisted of the South
African public sector. The findings indicate that risk management aspects do differ according to
years of experience in both risk management and IT project management. They provide evidence
that experience has a bearing on how risk is being managed in IT projects. This provides
researchers and practitioners with evidence that risk management is being applied although this is
depended on one’s experience. It is recommended that training and seminars among others could
assist to close such a gap for project managers.
Key Words: Risk management, IT project management, knowledge base, project clients
Introduction
Project risks are uncertain and if they become a reality, this has an impact on at least one project
objective (time, quality or cost). According to the Project Management Institute (PMI) (2008), risk
management in projects aims at decreasing the likelihood and impact of negative events while
increasing the likelihood and impact of positive events. Bannnerman (2008) defines risk
management in IT projects as a set of processes and procedures intended to identify, analyse and
handle risk factors, thus improving the likelihood of attaining a successful IT project result and/or
circumvent its failure. He further argues that management of risk in IT projects is significant,
assists in detecting technical and managerial issues beforehand (Huang & Han, 2008) and can be
a vehicle for delivering IT-enabled organisational change, thus attaining business objectives.
Risk management in IT projects has become a focal point in organisations, given that it can
minimise the chances and impacts of project threats, and ultimately create opportunities throughout
the project lifecycle (Alhawari et al. 2012). Furthermore, the view of risk in IT projects differs
among stakeholder groups (Bannerman, 2008), across projects, between cultures, over time and
life cycle stages. Interlinked to that, Charette (2005) holds that risk management in IT projects can
significantly increase their outcome. This notion is also supported by Brandas, Didraga and Bibu
(2012), who assert that practical experience specifies that using formal and structured processes
for the management of expected and unexpected risks minimises unpredictable costs, stress,
misunderstandings and delays. On the contrary, Ibbs and Kwak (2000) established that risk as a
knowledge area had the lowest maturity of all project management knowledge areas in information
systems projects. This validates what Ropponen (1999) had found, that 75% of IT project
managers were not following any risk management approach, since they appreciated its concepts
and managerial implications only vaguely. Furthermore is the need to ascertain if experience is
essential to the application of risk management aspects in IT projects.
In another study, De Wet and Visser (2013) point out that the effectiveness and status of risk
management in IT projects in South Africa need to be explored. This notion is supported by Mudau
and Pretorius (2009), who hold that there is still a gap between proper practice and frequency of
usage of risk management methods and activities in IT projects in South Africa. What becomes
pronounced is whether the application of risk management in IT projects is based on experience
in either IT project management or risk management. Based on the foregoing, it becomes
imperative to establish the following research questions, wherein the aspects are risk management
as a knowledge base, risk management in current IT projects, risk management status in IT projects
and risk management and project clients:
RQ1: Does risk management aspects differ according to years of experience in IT project
management?
RQ2: Does risk management aspects differ according to years of experience in risk management
in IT projects?
2 Literature Review - Theory and Practice of Risk Management
Chaos in IT Projects
Pugh and Hickson (2007) suggest that in as much as it is necessary to react to changes, it is
imperative to anticipate them by foreseeing the market and preparing employees in advance. They
summarise this as the balance on edge of the chaos era, which became the organisational theory
after 2000. They further postulate that in order to avoid tumbling into chaos, competing on the
balance of edge of chaos entails improvisation and co-adaptation. However, what is important to
note is that whereas improvisation takes on the challenge of balancing sufficient organisation to
budget, schedule and function efficiently, co-adaption balances the advantages of synergies
between different businesses within the organisation (Pugh & Hickson, 2007). This does not go
without including project management and risk management in projects; this has become clear
because of chaos in organisations. Furthermore, many firms are engaging in IT projects, as the
firms’ strategy constantly changes to allow it to compete on the edge.
Based on the foregoing, organisations are sensitive to selecting the right IT projects and project
management is seen to yield value in enterprises from such projects (Richardson, 2010). This,
Richardson highlights, is assisting organisations to achieve quicker turnaround times to satisfy
customer demand. However, this is against the background of chaos in IT projects highlighted
earlier. In addition, many of these tools and techniques developed earlier should be devoted to
minimising IT project risks resulting from chaos while increasing profits, thereby boosting
shareholder value and gaining competitive advantage in today’s overall marketplace.
Risk Management in IT projects
Alhawari et al. 2012 posit that during the lifecycle of an IT project, risk management turns out to
be a crucial aspect in organisations, since it can capture opportunities that could occur and
simultaneously reduce the likelihood and impact of IT project threats. However, risk management
is often ignored though it can have a substantial effect on the choice of projects with regard to
project scope and the cultivation of realistic schedules and cost estimates, as well as project
stakeholders, to understand the project’s description (Susser, 2012) and assist with the integration
of other project knowledge areas. Furthermore, Mnkandla (2012) postulates that there are many
concerns relating to risk management in IT projects, such as ostensible failure by many
organisations to implement project risk planning, monitoring and control properly. In addition,
risk management in projects is the knowledge area applied least often because it has no visible
artefacts yet lack of it will affect project success negatively if the risk should occur.
Having said that, it is of paramount importance to note that the definition of risk management in
projects put forward by Richardson (2010, p. 297) has been adopted in this research: “it is the
means by which uncertainty is systematically identified and managed in order to increase the
probability of meeting project objectives”. Apart from this definition, the objective of risk
management aims at decreasing the likelihood and impact of negative events while increasing the
likelihood and impact of positive events in the project. Simply put, it is the ability of identifying
risks in a project.
Risk Management Process
In order to manage complex issues associated with IT projects, Kwak and Stoddard (2004)
recommend the implementation of a formal risk management process. In addition, Richardson
(2010) highlights that this process needs to be proactive throughout the project life cycle in order
to remain effective. Broadly speaking, such a process involves the planning, monitoring and
control of risks in a project. During project planning, risk management encompasses developing
project risk plans, identifying risk, performing qualitative and quantitative risk analysis and
determining how to respond to these risks (PMI, 2008). Furthermore, Huang and Han (2008)
follow a similar approach when they highlight that risks need to be quantified, and that their impact
on performance of the project must be evaluated together with the development of strategies of
control. Interlinked to this is a view by Hubbard (2009), who posits that risk management is the
identification, assessment and prioritisation of risks followed by effective and efficient resource
application to maximise the realisation of opportunities and reduce, control, and monitor the
likelihood and/or impact of events.
There is minimal empirical evidence that project risk knowledge is in fact used and that the risks
in IT are indeed manageable (de Bakker, Boonstra & Wortmann, 2009). However, what is more
important to note is that analysing the assumptions behind risk management in projects reveals
that the risk management instrument may only work under stringent conditions. More in-depth
work is consequently required on the risk management process in IT projects. More so, to establish
whether the application of risk management in IT is based on experience in either IT project
management or risk management.
Risk management claims to support project managers to manage risk successfully and minimise
the adverse effect of risk on project outcome. On the contrary, Sharma and Gupta (2011) found
that IT project managers do not often apply a process to manage risk. Given that evidence is often
descriptive and undeveloped, there is variability in the reasons for this. One notable reason,
according to Kutsch and Hall (2005), is that IT project managers deny the presence of risk and
uncertainty, or delay doing this until circumstances has improved. This is contrary to the rational
concept propagated by management approach scholars. This further necessitates the need to carry
out such research in light of the evidence of limited application of risk management in IT projects.
3 Methodology
A positivist research philosophy was used in the form of a survey. Stratified random sampling was
adopted whilst a questionnaire was used to collect data. The questionnaire was prepared based on
literature and edited by experts, thus improving content and face validity. After careful
consideration of the feedback and incorporation of the modifications and corrections, a final survey
instrument was developed.
Statistical Package for Social Sciences was used for data analysis whilst validity and reliability of
the constructs measured were assessed using exploratory factor analysis and Cronbach’s Alpha
respectively. The cronbach’s alpha of the research instrument was 0.887, which is “good” as it
affirms the reliability of the measurement instrument.
Descriptive statistics were used to describe the data, while Kruskal-Wallis test was applied to
determine differences between groups with more than two categories. 500 public sector employees
made up the population. A response rate of 78% was obtained after 130 questionnaires were issued
with 102 being returned. This provided an opportunity to generalise results to the population based
on the sample size according to Bartlett, Kotrlik and Higgins (2001).
Based on Table 1, it can be stated that the majority of the respondents were project managers. This
may be attributed to the fact that they are mainly involved (hands on) in the processes and
procedures of risk management. It is also evident that more than 50% of the respondents had more
than 10 years’ experience, highlighting the fact that the group had vast experience in IT project
management. Furthermore, the majority of the respondents had more than six years’ experience in
risk management in IT projects. The demonstrated level of experience induces confidence in the
data provided, thus the researcher can infer conclusions from the dataset.
The ratio of males to females is practically 1:1. Management positions used to be dominated by
males historically, though at present females seem to be penetrating the field. This demonstrates
the journey of transformation in the South African public sector, as demographics in other studies
provide evidence of male domination in IT projects, according to Bunton and Bruwer (2012).
Table 1: Characteristics of the respondents in the sample
Variable Category Frequency %

Job title Executive 3 2.9%
Senior Project Manager 23 22.5%
Project Manager/Specialist 46 45.1%
Operational Specialist: Projects 17 16.7%
Business Analyst 13 12.7%
Total 102 100.0%
Years of experience in IT project 1 - 5 years 8 7.8%
management 6 - 10 years 40 39.2%
11 - 20 years 45 44.1%
More than 20 years 9 6.8%
Total 102 100.0%
Years of experience in risk 1 - 5 years 11 10.8%
management in IT projects 6 - 10 years 53 52.0%
11 - 20 years 30 29.4%
More than 20 years 8 7.8%
Total 102 100.0%
Gender Male 49 48.0%
Female 53 52.0%
Total 102 100.0%
Data Presentation and Discussion of Findings
In this study, the Kruskal-Wallis test was used to determine whether risk management aspects
differed according to years of experience in IT project management and experience in risk
management in IT projects, i.e., what influenced the disparities. The null hypothesis in this or any
similar situation concerning several independent samples of ranked data is:
H0: The samples come from identical populations
H1: The samples come from different populations.
The test was done at a 5% level of significance (α = 0.05).
In order to answer research question 1 the following objective was formulated “To determine
whether risk management aspects differ according to years of experience in IT project
management”. The Kruskal-Wallis Test was used to determine differences in terms of years of
experience in IT project management. The years of experience in IT project management were
grouped into four groups, namely 1 – 5 years, 6 – 10 years, 11 – 20 years and more than 20 years.
The following hypothesis was tested:
H1H0: Risk management aspects do not differ according to years of experience in IT project
management.
H1H1: Risk management aspects differ according to years of experience in IT project management
All aspects had p-values < 0.05 leading to the null hypothesis of identical populations being
rejected, as shown in Table 2. Furthermore, all p-values were less than 0.05, indicating that the
duration of experience in IT projects influences the ranking of the variables. In terms of the
composite variable “risk management as knowledge base”, the Kruskal-Wallis test (Table 2)
resulted in the null hypothesis of having identical probability distributions being rejected.
Table 2: Kruskal-Wallis test to determine difference in location of the composite variables by
years of experience in IT project management
Factor Group Mean Chi- p-value Decision

Rank square
Value
Risk management as 1 – 5 years 14.19 28.471** 0.000 Null

knowledge base hypothesis
6 – 10 years 41.73 is rejected
11 – 20 years 66.20
More than 20 years 54.61
Risk management in current 1 – 5 years 13.00 27.421** 0.000 Null

IT projects hypothesis
11 – 20 years 62.67
Risk management status in 1 – 5 years 35.69 16.112** 0.001 Null

11 – 20 years 52.06
Risk management and 1 – 5 years 30.19 9.434* 0.024 Null

project clients hypothesis
11 – 20 years 46.40
Note: The statistical significance of the chi-square values is ** for p<0.01 and * for p<0.05
Considering the box plots in Figure 1 (in Appendix 1), those with less experience gave lower
ratings than the experienced ones. In addition, the results demonstrated that most of those with 11
– 20 years’ and more than 20 years’ experience had a rating of more than 3, suggesting that there
was more agreement on the aspect “risk management as knowledge base”.
In terms of the composite variable “risk management in current IT projects”, the Kruskal Wallis
test (Table 1) resulted in the rejection of the null hypothesis of having identical probability
distributions. The null hypothesis of having identical probability distributions based on the Kruskal
Wallis test in Table 1 was rejected for the composite variable “risk management status in IT
projects”. Considering the composite variable “risk management and project client”“, the null
hypothesis of having identical probability distributions was rejected based on the Kruskal-Wallis
test in Table 1.
Based on the foregoing, H1H1, which states that, “Risk management aspects differ according to
years of experience in IT project management”, is accepted.
In order to answer research question 2, the following objective was formulated, “To determine
whether risk management aspects differ according to years of experience in risk management in
IT projects.” The years of experience in risk management were similarly classified as the years of
experience in IT projects and were therefore also grouped into four.
The following hypothesis was tested:
H2H0: Risk management aspects do not differ according to years of experience in risk
management in IT projects
H2H1: Risk management aspects differ according to years of experience in risk management in IT
projects
Most aspects had p-values < 0.05, leading to the null hypothesis of identical populations being
rejected, except for the aspect “risk management and project clients”, as shown in Table 3. Thus,
the composite variable “risk management and project clients” was not influenced by years of
experience in risk management.
In terms of the composite variable “risk management as knowledge base”, the null hypothesis of
having identical probability distributions was rejected, since the p-value < 0.05 from the Kruskal
Wallis test in Table 3.
Table 3: Kruskal-Wallis test to determine difference in location of the composite variables by

years of experience in risk management
Factor Group Mean Chi-square p- Decision

Rank value
Value
Risk management as 1 – 5 years 39.45 16.235** 0.001 Null

knowledge base hypothesis
11 – 20 years 69.07
Risk management in current 1 – 5 years 33.73 15.068** 0.002 Null

11 – 20 years 61.75
Risk management status in 1 – 5 years 35.09 20.424** 0.000 Null

11 – 20 years 60.17
Risk management and 1 – 5 years 45.50 1.895 0.000

project clients
6 – 10 years 54.50
11 – 20 years 47.10 Null
hypothesis
More than 20 years 56.38 is rejected
Note: The statistical significance of the chi-square values is ** for p<0.01 and * for p<0.05
The information is shown in Figure 5 (in Appendix 2). It can be observed that those with 11 – 20
years of experience tend to agree on aspects of risk management as knowledge base. In terms of
the aspect “risk management in current IT projects”, the Kruskal-Wallis test in Table 3 resulted in
the rejection of the null hypothesis of having identical probability distributions.
Figure 6 (in Appendix 2) demonstrates that respondents with more than 20 years’ experience
ranked the aspect “risk management in current IT projects” higher. The results highlight the link
between more years of experience and higher levels of agreement on this aspect. The aspect “risk
management status in IT projects” resulted in the rejection of the null hypothesis of having
identical probability distributions, since the p-value < 0.05, as depicted in in Table.
Hence, H2H1, which states that, Risk management aspects differ according to years of experience
in risk management in IT projects, is accepted.
Conclusions and Implications
Each of the constructs that were employed to determine if risk management aspects differ
according to years of experience in IT project management supported the notion. Similarly all
constructs were in support that risk management aspects differ according to years of experience in
risk management in IT projects. Based on the foregoing, the study established that although risk
management is subtly applied in IT projects, experience in either IT project management or risk
management is fundamental whenever it is being applied.
The implications could be explored in two perspectives which are managerial and theoretical. It is
imperative that project executives spearhead a systematic risk management improvement process
in organisations seeking to steadily overcome barriers to risk management implementation.
In addition, giving risk management a strategic impetus is important. If risk management is

adopted as a strategic objective, it implies that the organisation is aligned towards meeting risk
management objectives. It also implies that there is executive support for the process hence the
essential training and resources (time, budget and human resources) would be committed to it.
Beyond this would be the creation of an implementation plan for risk management which should
be reviewed regularly in order to keep it applicable thereby driving effectiveness and innovation.
Further to the implementation plan and irrespective of risk or project management experience,
training interventions need to be adopted in order that risk management is applied in organisations.
A development programme on risk management would impart such knowledge across the
spectrum of different levels of experience in project management. This should be done in
consultation with project executives, who in turn must assist in determining the requisite attributes
for the programme. More so, seminars and in-service training for project managers and those
involved in IT project risk management can assist with imparting risk management skills.
It is not enough to have the risk management structures in place if risk management is not ingrained
in the culture of the organisation. Thus, organisations need to engrain risk management as
conversational points.
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Appendix 1 – Based on research question 1
Figure 1: Kruskal-Wallis test for composite variable risk management as knowledge base by
years of experience in IT project management
Figure 2: Kruskal-Wallis test for composite variable risk management in current IT projects
by years of experience in IT project management
Figure 3: Kruskal Wallis test for the composite variable risk management status in IT projects
Figure 4: Kruskal Wallis test for the composite variable risk management and project clients
Appendix 2 – Based on research question 2
Figure 5: Kruskal-Wallis test for the composite variable risk management as knowledge base
by years of experience in risk management
Figure 6: Kruskal Wallis test for the composite variable risk management in current IT projects
by years of experience in risk management
An Analysis of Outsourcing Drivers for Maintenance Services in a Power
Utility in South Africa
Rhulani I Mavunda
Department of Entrepreneurship, Supply Chain, Transport, Tourism & Logistics Management
mavunri@unisa.ac.za
Ozias Ncube
Graduate School of Business Leadership (SBL)
ncubeo@unisa.ac.za
Abstract
Today, most companies especially power utility industry have built very sophisticated, multitier
and multi-enterprise supply chains consisting of distribution centers, contract manufacturers
(CMs), suppliers database, supply relationship management (SRM) and the like. The once simple,
linear supply chains of yesterday now consist of a virtual network of interconnected players
responsible for different pieces of the supply chain management operation.The overall purpose of
the research is identifying the drivers of outsourcing and assessing its effectiveness for a power
utility. The power utility selected as a case study is a multi-functional company with many of its
inputs outsourced from many different companies, but the company has not been able to derive
the optimal benefits in terms of comparative cost reduction advantage and tremendous increase in
corporate performance and profit. The research findings reveal that the rationale behind
outsourcing of maintenance services to third party companies by management are mainly centred
around cost reduction, flexibility, service improvement prospect and the promotion of Broad-Base
Black Economic Empowerment (BBBEE).
Keywords: Supply chain, supply chain strategy, outsourcing, maintenance services, power plant
operations, reliability, cost, flexibility, quality, innovations, time.
1. Introduction
Outsourcing is regarded as one of the most important business strategies that a large number of
multinational companies have used for decades. In order to get work done more efficiently and
increase flexibility to meet the changing business and commercial conditions, outsourcing for
supply chain functions has drawn considerable attention in the most recent years. Outsourcing, as
an operational strategy, has become very popular with companies as firm’s redirect valuable
internal skills and capabilities to high value adding activities (Venkatraman, 2004).
Optimizing the cost of maintenance service is important in the power plants. A study by Pinjab,
Pintelon, and Vereecke (2006), indicates that the cost of maintenance account 15 to 40 percent of
production costs. This is a clear indication that maintenance costs are important for both
productivity and profitability in many companies. When power utility giants strive to minimize
operating costs, the maintenance costs become a target for outsourcing as a non-core function of
the company (Levery, 1998).
2. Objectives and research questions
The objective of the study was to assess the effectiveness of outsourcing maintenance services in
the power utility industry based on case study of a power plant in South Africa. In particular, the
specific objectives of the study included the following (1) to identify various outsourcing drivers
in the supply chain of power utility company; (2) to determine the effectiveness of outsourcing
maintenance services at power utility, (3) to determine whether outsourcing of maintenance
services of power station is implemented within the power utility, and (4) to determine challenges
the power utility is experiencing in outsourcing maintenance services in order to meet its
operational needs. The following research questions guided the research: (1) what are the drivers
of outsourcing in the supply chain of power utility company? (2) How are outsourcing activities
being managed at the power utility? (3) is the outsourcing of maintenance of power plant
implemented effectively? (4) What are the various challenges the company has been facing in its
outsourcing venture in order to meet its operational needs?
3. Theoretical and empirical literature review
Greaver (1999) defined strategic outsourcing as “the act of transferring some of the organisation’s
internal functions or activities to outsiders to provide goods and service by means of a contract”
(Greaver,1999:10). Furthermore strategic outsourcing must be aligned with the organisation’s long
term goals and vision. Strategic outsourcing should take into account the overall supply chain
performance and business performance (Greaver, 1999:10). According to Lonsdale & Cox (1998),
they defined outsourcing as the strategic use of external companies to perform activities
traditionally handled by internal staff. They further mentioned “the process of transferring an
existing business activity to a third party” (Lonsdale & Cox, 1998:15). Different authors agreed
that outsourcing decisions should be strategic and made in alignment with the firm’s outsourcing
strategies (Chamberland, 2003; Gottfredson et al. 2005; and Merrifield, 2006). This requires that
the factors driving outsourcing to be in alignment with the strategic goals and competitive priorities
of the firm. According to Boyer and Lewis, (2002) “a firm’s competitive priorities can be defined
along the dimensions of cost, quality, time, flexibility, and innovativeness (Boyer & Lewis,
2002:40).
There is general consensus (Slack et al, 2010, Chambers, Harland, Harrison and Johnson,
2003:475), that supply chain management (SCM) is about managing the entire chain of raw
material supply, manufacture, assembly and distribution to the customer. Quayle and Jones
(1999:4) define supply chain as an integrative philosophy to manage the total flow of a distribution
channel from the supplier to the ultimate user. According to Kampstra et al (2006) SCM is “a
source of competitive advantage with the potential for performance improvements in customer
service, profit generation, asset utilisation and cost reductions” (Kampstra, Ashayeri & Gattorna
2006:312). Supply chain involves the upstream suppliers of raw materials to companies that
manufacture products and supply-finished goods downstream through distribution centres to
retailers that sell them to the end users/consumers (Barnes, 2008: 211).
Maintenance in its narrow meaning includes all activities related to maintaining a certain level of
availability and reliability of the system and its components and its ability to perform a standard
level of quality (Al‐Turki et al. 2014). Maintenance also includes engineering decisions and
associated actions that are necessary for the optimisation of specified equipment capability; where
capability is the ability to perform a specified function within a range of performance levels that
may relate to capacity, rate, quality, safety and responsiveness (Kumar et al. 2014). Maintenance
management must align with the business activities. Maintenance planning is done at three levels,
strategic, tactical and operational levels as suggested by Crespo and Gupta (2006).
4. Conceptual framework
The conceptual framework is based on utilising outsourcing to achieve improvement in

organisational performance. Figure 1 illustrates the proposed conceptual framework for a
successful outsourcing strategy that can provide benefits and cost-savings for any power plant,
flexibility of service providers, reduce turnaround time, improve quality, expanded talent pools
(innovation), make use of environmental friendly process (green economy) and promote the local
small business empowerment (SMME) while focusing on core business. In order to achieve
outsourcing objectives, the following drivers were identified: cost, flexibility, time, innovativeness,
quality, environmental and BBBEE status.
Figure 1: Drivers for outsourcing maintenance services
5. Research design and methodology
A case study was adopted to obtain detailed information on the subject. The choice of this approach
is based on the fact that the study required multiple sources of evidence and issue being
investigated which in this case is assessing the effectiveness of outsourcing maintenance services
by the Power Utility. A purposive survey method was employed in gathering information for the
study. Both primary and secondary data were analyzed, (1) Primary data was collected from
respondents which consist of people in both managerial and non-managerial positions of the power
utility as well as companies who are engaged with the power utility in providing maintenance
services. (2) Data obtained provided information for a general assessment of outsourcing in the
supply chain of the Power Utility. (3) Data was collected through direct visit, interviews using a
semi-structured questionnaire. The targeted population sample was staff members and contractors
who work in the power plant. Purposive sampling was used, with a targeted sample size of workers
and senior executives ranging from plant manager to schedule Maintenance Manager. The senior
executives were selected based on their extent of involvement with the day-to-day operations in
their respective business units. For the sake of this study, eight participants were selected in
management level who are actively involved in the process of outsourcing, manging suppliers or
vendor, who are involve in the selection of vendors and make decision about the outsourcing
initiatives. Interviews were semi-structured, revolving around activities that were outsourced,
outsourcing processes and what factors drove decisions to initiate outsourcing processes.
6. Research findings and discussions
The main focus of the research included unpacking the drivers for outsourcing of maintenance
services, selection criteria for service providers, benefits and pitfalls associated with outsourcing
and identifying the factors that may lead to outsourcing success.
6.1. The drivers of outsourcing
Respondents were asked the questions on how they rate the drivers of outsourcing of maintenance
services in the power station. The results revealed the following profile for drivers: that 25% of
respondents rate the cost as the main drivers of outsourcing followed by time (20%), quality 16%,
innovation 15%, flexibility 11%, transformation and local business development (BBBEE) 10%
and finally the environmental issues 3%.
6.2 Experiences of outsourcing/contracting out maintenance activities
All participants indicated that maintenance department or section interface on a daily basis,
normally in the form of daily meetings where current plant problems are discussed. The interviews
were more encouraging since the majority of respondents were confirmative of this highly
anticipated expectation of cost cutting in operational burden. Only few are uncertain of the true
reflection of reduction in cost, possibly because they are aware of the hidden costs associated with
the outsourcing engagement. Another important ascertainment is that the participants considered
other factors rather that cost cutting to be more important such as supplier must meet the power
utility’s expectation, lack of capacity and technicians.
6.3 The possibility to improve outsourcing process
The general feeling from participants was that the maintenance functions could be improved by a
regular strategic sessions between Eskom and suppliers. The participants also agreed on the
maintenance performance indicators and reports adherence was low or non-existence. One
participant from Engineering division pointed out that plant maintenance availability and
reliability are the most critical function to be given a priority. He continued by saying, “However,
feedback to the maintenance division is still lacking support from senior managers”
Majority of participants mentioned that some suppliers, consultant and customers similarly exerted
pressures to outsource. Managers were regularly confronted with suppliers who suggested that
outsourcing might be able to lower costs or improve quality of service. The managers I interviewed
generally recognised that outside advisors often had a vested business interest in promoting
outsourcing. Nonetheless, they believed they could offer important information and experiences
and in some cases this swayed the decision towards outsourcing.
6.4 The reaction of management and trade union towards outsourcing
Some participants said during his interaction with consultants that they suggested substantial cost
savings could be obtained by outsourcing a specific activity. Our respondent indicated that, in
practice, this was not easy to realise but the consultant “did shake things up in the long term”.
Majority of participants also indicated that the existence of trade union complicate an outsourcing
processes. Where labour unions were involved, this resulted in delays and increase in costs.
Majority of respondents indicated a huge concern about the power or organised labour’s
involvement in the strategic decision making process.
6.5 The monitoring mechanism to ensure successful outsourcing
The important mechanism that connects cost, innovations, and flexibility, quality and time drivers
was identified as continuous improvement. The motive cited was to create new and or improved
maintenance services that will lead to reliability and efficient operations of the power station.
Majority of respondents consider the outsourcing process and organisational structure as not
standardised and stable. They believed that sometimes outsourcing is not used for business
objectives, but more to address societal and or transformational agenda.
6.6 The quality of work done by contractors
The majority of the respondents are aware of the criteria being used to measure quality of services,
reliability, responsiveness and assurance. However, the respondents indicated that it is
discouraging to see that there are still few managers that are uncertain of these criteria. This finding
may be worrying and its associated concern needs to be addressed if the power utility wishes to
strengthen its future outsourcing engagement and produce more satisfying outsourcing results.
6.7 Challenges and risk awareness
One respondent mentioned that “….the interaction with new vendors creates disturbances and
requires adaptations of the process, which is challenging….”. Also, not all new employees are
aware of existing processes. Another participant also mentioned that outsourcing sometimes create
tension between contractor and power utility employees, as power utility employees feel that their
jobs are at risk of being usurped. It was further indicated that “the maintenance system integrates
very well with materials systems in theory, however, from a practical point of view there are
serious shortcoming”. These shortcomings are caused by lack of integration into supply chain by
maintenance contractors.
Technology is not considered as the main driver of innovations by majority of respondents. This
is contrary to expectations, as technology as a huge of capacity considerations, innovation and
expert competence.
6.8 The management of risk of outsourcing
In analysing risk awareness associated with outsourcing, the majority of respondents believed that
risk awareness contribute to better outsourcing decisions. Interviews revealed several interesting
points observations around risk concerns - risk relevant to people, transitional, management costs,
the culture differences, the contractual obligations, measure performance and financial risk. Few
respondents mentioned the risk associated with scope of work or project associated with cost
estimates and finally, the risk related to relationship with services providers.
6.9 Issue of governance related to outsourcing
The majority of respondents believe that relationship management is important between the parties.
They all complained about the process of appointing suppliers, acquisition strategy, budget
allocation, tendering process and implementation strategy agreed upon. Poor governance structure
in managing ongoing contract relationship was identified as a major concern.
Table 1 provides a summary of these findings.
Table 1: Summary of key findings
Experience of outsourcing and competencies Losing sight of the key objectives of the
related outsourcing
Pressure for managers to reduce cost leading

to poor decision making in the early stages
Unrealistic expectations
Maintenance related Poor maintenance planning
Conflict between ownership of problem
Response time on breakdown too slow
Maintenance system delays
Relationship/contract related Poor cultural fit and compatibility of the

parties
Poor communication; parties not proactively

sharing necessary information
Contract not providing for sufficient

flexibility, time frame and deliverables
A poorly negotiated contract
Risk related Failure to address risk of hidden cost
Labour union issues
Black Economic empowerment deals – no

relevant experience
Suppliers related Confidence lost in supplier’s ability to

provide efficient service due to lack of clear
objectives and structured transition plan
Systems related Lack of integration "centralised control"
Knowledge of system varies from user to

user
The reliability of the system
7. Conclusions and Recommendations
A careful study of the data collected from the field revealed certain significant issues. These are
summarized in this section and recommendations are made.
The main observation is that the rationale behind outsourcing of maintenance services to third
party companies by the power utility’s management are mainly centred around cost reduction,
flexibility, service improvement prospect and compliance with the Broad-Base Black Economic
Empowerment (BBBEE) requirements. Another important ascertainment is that the respondents
considered other factors rather that cost cutting to be more important, such as supplier must meet
expectation, lack of capacity and availability of competent technicians.
7.1 Effectiveness of outsourcing
It can be extrapolated from the findings that although most power utility employees responded
positively towards the power plant maintenance practices put in place. However there were some
negative responses, mainly from the officers who have to deal with the customer problems of poor
supply quality resulting from non-maintenance. The general feeling from respondents was that the
maintenance functions could be improved by regular strategic sessions between the power utility
and its contracted suppliers.
7.2 Implementation of outsourcing
Majority of respondents also indicated that the existence of trade union complicate an outsourcing
processes. Where labour unions were involved, there is a perception that it resulted in delays and
increase in the cost of doing business. It was also pointed out that the utility is using a prescriptive
model strategy which is focused on five systematic procedures in selecting and evaluating service
providers. This strategy provides a feedback mechanism which can result in termination, re-
tendering or renewal of the contract based on the kind/type of services rendering and performance.
This provides a credible process for managing the implementation of outsourcing activities.
7.3 Challenges of outsourcing maintenance service
It was further revealed that most of the service providers found it difficult to work with utility
employees with tensions and mistrusts rife between the two sets of workers. It was revealed that
the utility is engaging a number of service providers for different maintenance services that are
micro-managed by a central office.
7.4 Assessing the effectiveness of outsourcing maintenance services
Resources constraints are behind the implementation of outsourcing of maintenance approach. The
lack of resources available to the power utility giants resulted in poor implementation of
outsourcing maintenance services. Other commitments that the power utility had took priority over
having standardised maintenance procedures that covered all power utility stations. Expanding
network coverage has been high on the commitment of the utility, for example, household
electrification as one of the government’s priorities.
It can be concluded from the findings that the utility has an ineffective maintenance department.
This makes maintenance to be constantly overlooked in its importance and always overshadowed
by other functions when it comes to prioritisation. The maintenance services are in the hands of
service providers. The absence of a maintenance representative at the highest management level
makes area managers to accept and tolerate whatever resources have been allocated for
maintenance.
The approach taken by the utility not regarding maintenance strategy has resulted in the electricity
load shedding. The reality is that there are still concerns about the balance between electricity
demand and supply in the country. The negligence in maintaining the power plants is a source of
customer dissatisfaction.
7.5 Recommendations
Several linkages can be established in order to identify core objectives. In order to enhance the
implementation of outsourcing of maintenance as strategy the following recommendations are to
be considered;
Appropriate budgetary concessions that cover the scope of work should be made available and be
proportionally distributed across the service provider regime in accordance with the scope of work
and quality of work.
On-going impact assessment mechanism should be established by the utility so as to continual

inform and adapt procurement policies accordingly. Impact assessment could be carried out
regularly (for example, every 2-3 years). This will help test how service providers are progressing
after each cycle of the operation.
Since in some cases, the kind of services outsourced may be routine and standardised in nature,
the procurement policy adopted by the utility should be innovative enough to allow for expedition
to save time and ensure prompt quality delivery of services.
The utility should introduce a maintenance department in its structure. The introduction of a fully-
fledged maintenance department will allow for visibility and presence and executive level where
prioritisation of resources is being dealt with.
Decentralisation of power to allow the plant managers to plan they maintenance schedule
according to the operational needs. A quick response on breakdown or shut down must be given a
priority.
Adequate information sharing between parties, improve communication and regularly meetings
with services providers are encouraged.
Criteria for supplier selection while conforming to the country’s transformational agenda should
be anchored on capability, expertise and experience of consistent high performance.
7.6. Conclusion
While the scope of the study was narrow, it was however sufficient to explore the objectives of the
study. It is clear from the findings that the major drivers for out-sourcing of maintenance services
are cost, quality and the South African government’s transformational agenda of widening
economic participation. However, in terms of the process of implementation outsourcing is flout
with vulnerabilities that emanate from supply chain policy, environmental concerns and general
supplier management practice inadequacies. The recommendation section identifies the key areas
for intervention by the power utility. In terms of limitations for the study, the lack of
comprehensive survey with focus on both operational and strategic perceptions limits the
generalisation of the results. A comprehensive investigation is a consideration as scope for future
study.
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Pavement Management Analysis Of Arterial Roads in the City of
Chattanooga, Usa Using Micropaver
Saliha Ammour Merabti

MSc Civil Engineering, University of Tennessee at Chattanooga USA
Xvm133@mocs.utc.edu
Dr. Mbakisya Onyango

Assistant Professor, Dept. of Civil; Engineering, University of Tennessee at Chattanooga, USA
Mbakisya-Onyango@utc.edu
Dr. Joseph Owino

Professor, Dept. of Civil; Engineering, University of Tennessee at Chattanooga, USA
Joseph-Owino@utc.edu
Dr. Ignatius Fomunung

Associate Professor, Dept. of Civil; Engineering, University of Tennessee at Chattanooga, USA
Ignatius-Fomunung@utc.edu
Dr. Weidong Wu
Assistant Professor, Dept. of Civil; Engineering, University of Tennessee at Chattanooga, USA
Weidong-Wu@utc.edu
Abstract
Lack of sufficient funds to repair and maintain roads is a challenge to many transportation agencies.
This results to costly repair and maintenance procedures. The University of Tennessee at
Chattanooga used Micropaver software to study the condition of arterial roads in the City of
Chattanooga. The five-year required pavements maintenance and repairs were analyzed using five
budget scenarios and the critical pavement condition index method. Results showed that, the
backlog elimination budget would be the best scenario because it increases the pavement condition
and eliminates the backlog of major maintenance and repairs over the five-year period. The
unlimited budget seems to be ideal but does not improve pavement condition. Maintaining current
condition and limited budget scenarios would increase both the backlog and the total cost of
maintenance and repairs over the period of five years.
Keywords: PMS, Micropaver, pavement budget, maintenance, rehabilitation.
1.0 Introduction
The city of Chattanooga is located in southeastern Tennessee and has a population of 173,366 (US
Census Bureau, 2013). The road network of the city is comprised of 2,311.15 lane miles of locally
maintained paved roads, which includes 101.46 lane miles of principal arterials, 314.55 lane miles
of minor arterials, 172.67 lane miles of collectors and 1,722.46 lane miles of local roads. In this
case study, principal arterials were selected for the analysis because they carry more heavy traffic
loads, although they represent only 4.39 % of the whole pavement network of the city. The
inspection performed by the city in year 2010, indicated that all roads were in (good) condition.
The average pavement condition index (PCI) was 79.8, whereas the average condition of principal
arterials was 82.7 as shown on Table 1. Figure 1 illustrates the principal arterials condition
distribution. It should be noted that pavements that are in good condition today are subject to
deterioration. Consequently, if nothing is done in five to ten years, these roads will require more
elaborated rehabilitation, such as resurfacing or reconstruction. This calls for proper allocation of
the funds, utilizing cost-benefit analysis in order to improve pavement condition and performance.
Table 1: Characteristics of the road network of Chattanooga
Section Weighte Lane Percen Number Percen Average Average age

rank d average miles t area of t conditio at inspection
condition sections section n
s
Principa
l 82.4 101.46 4.39% 201 2.27 82.76 8.98
Minor 13.61
83.67 314.55 % 869 9.8 83.2 10.81
Collecto
r 80.34 172.67 7.47% 526 5.93 78.82 12.58
Local 74.53
75.26 1,722.46 % 7,273 82 74.42 14.88
Total 2,311.15 100% 8,869 100
2.0 Background and literature review
Pavement management system (PMS) as a decision making tool is used to predict pavement
maintenance and rehabilitation requirements in order to make optimal use of road maintenance
funds. The main objective is to preserve pavements in good condition rather than wait to
reconstruct after major pavement failures (DYNATEST, 2012). Early investments in maintaining
the integrity of roads will pay off over time, each dollar spent on maintaining roads in fair condition
will forego the need to spend four to five dollars on rehabilitating or reconstructing a road in very
poor condition, e.g., Figure 2 (City of South Burlington, 2004).
100
80
Avg 60
Condition
40
20
0
Failed Poor Fair Good
Condition at Last Insp Figure 2: Pavement Deterioration/ Rehabilitation

Relationship
Figure 1: Principal Arterials’ condition

distribution at last inspection
In pavement management system, information about pavement condition must be collected, stored,
analyzed and used for decision making. Visual and automated condition surveys are commonly
used to determine the ride quality of pavement surfaces based on measuring indices such as the
Pavement Serviceability Index (PSI) or Pavement Condition Index (PCI) in this case study. The
Pavement Condition Index (PCI) method is used to assess and compare the overall condition of
pavements. PCI values are typically computed using a pavement management software package,
such as Micropaver, among others. The PCI was used to assess the pavement condition of the City
of Mandan, North Dakota using Micropaver software. It was concluded that the total overall cost
to the City is less if the major M&R backlog is eliminated over a five-year period. Figure 2 shows
the benefit of performing M & R before the condition drops too low (DYNATEST, 2012).
Ajay (2014) performed a PMS using Micropaver for the University of Rhode Island. He analyzed
the future condition using the critical PCI in the form of a regression curve using family modeling
along with an economic analysis. He showed the importance of pavement condition monitoring in
PMS (Figure 2).
Moazami (2010) evaluated pavement condition in Iran, along with deterioration prediction models
using the “family method” in Micropaver. The models showed a deterioration trend for 10 families
that correspond to 10 branches. Two budget scenarios: limited and unlimited were used for analysis.
He concluded that the minimum annual budget for one of the ten branches studied should not be
below the limited budget otherwise a rapid fall in overall condition will happen. Furthermore, the
annual budget (limited) causes the average weighted PCI of two branches to fall below the critical
PCI. In order to maintain the average current weighted PCI for all branches during the planning
period, a certain investment was needed. The City of Palm Spring California (2008) performed a
budget analysis under the M&R plan, the City would be required to budget $24.5 Million over 5
years (or $4.9 Million annually) just to ensure that the existing streets condition was maintained.
Kmetz (2011) evaluated 168 miles of the City of Westfield roads in Indiana using a program called
PASER developed by the University of Wisconsin. He determined that the Cities streets were in
good condition with over 80% of the roads having a PASER rating between 6 and 10 on a scale of
1 to 10, 1 being failed and 10 being excellent. Sen (2013) studied the pavement management
system using two software packages: Highway Development and Management System (Version
4) HDM-4 and Highway Pavement Management Application (HPMA) to find a cost-effective
strategy to prioritize each Hamilton County interstates and state routes. This prioritization was
accomplished based on the immediate maintenance needs required by the road sections. She also
concluded that the two software programs could be used for PMS and maintenance prioritization,
but the analysis is performed differently using the two software packages. Rajagopal (2006)
developed pavement performance prediction models for the City of Cincinnati, Ohio that can be
used in conjuction with the pavement management system, along with a decision tree to suggest
the appropriate maintenance and rehabilitation activities based on the current condition of the
pavement. This study used similar approach, using Micropaver software to analyse the base
condition and predict future condition of arterial roads for the city of Chattanooga.
3.0 Objective and methodology
The objective of this study was to perform optimization analysis of Arterial roads in the city of
Chattanooga using Micropaver software, in order to properly utilize the limited funding available.
The analysis took into account base year pavement condition and the maintenance treatments
required to keep the pavements at a satisfactory condition. Twenty-eight (28) branches comprising
201 sections were investigated. A branch is part of the pavement network or a single entity that
has a distinct function (a street or a parking lot). A section is a division of a branch. It is the smallest
management unit when considering the application of maintenance and rehabilitation (M&R)
treatments. For a network analysis, seven deterioration prediction models were developed to
analyze the present and predict future pavement conditions. An Economic analysis was also
performed to compare five different allocated budgets during the analysis period of five years.
4.0 Micropaver software
Micropaver is a Pavement Maintenance Management System software that was developed by the
U.S. Army Corps of Engineers in the 1970’s. It uses pavement condition inspection data and a
pavement condition index (PCI) to describe the base year condition, predict future condition,
determine its M&R needs, and decide where to best allocate the funds (Shahin, 2001). Micropaver
provides engineers with a systematic approach for the determination of maintenance and
rehabilitation needs and priorities for the projects (Bryar, 2013). The primary Micropaver modules
include: Inventory and M&R History, Inspection, Prediction Modeling, Condition Analysis, M&R
Planning, Project Planning and Reporting. The Inventory module allows users to easily organize
their inventory while providing numerous fields and levels for storing pavement data. The
objective of the inventory module is to provide data for identifying the pavement’s network,
branches, and sections (Shahin 2001).
In Field Inspection module, Micropaver uses Pavement Condition Index (PCI) based on American
Standards of Materials and Testing (ASTM D-6433-03). It is an overall indicator that measures
pavement surface operational condition and structural integrity (Shahin, 2001). The PCI provides
a numerical rating for the condition of road segments in a road network, where 0 is the worst
possible condition and 100 is the best. If properly designed and constructed, a new pavement
begins its service life with a PCI of 100. Due to the effects of loading and aging, a pavement
deteriorates over time. For each combination of distress types, severity level, and quantity
observed, points are deducted from 100, and its PCI decreases. The method has been field tested
and proven to be useful for determining M&R needs and priorities. Pavement condition in the City
of Chattanooga was categorized based on PCI (Figure 3).
Condition Category PCI Value
FAILED 0-20
POOR 21-50
FAIR 51-80
GOOD 81-100
Figure 3: Pavement condition assessment criteria for the city of Chattanooga City’s
Prediction models are used to accurately predict the future performance of the pavements and for
M&R requirements. Regression analysis is used to develop a separate prediction model for each
group. The dependent variable is pavement’s condition index (PCI) and the independent variable
is the corresponding number of years since construction or resurfacing (Age). The analysis in
Micropaver allows users to view the condition of the entire pavement network or any specified
subset of the network. Past conditions can be reported based on prior interpolated values between
previous inspections. Future conditions can also be determined using created prediction models.
This is used to plan future maintenance and repairs, and also it shows the consequence of not
performing major repairs and justifies budget requests.
M&R Work planning module is an elaborated tool for a multi-year network level and project level
M&R planning, scheduling, budgeting, and identifying the optimum levels of pavement
maintenance and repair activities for each section based on distress, current condition and rate of
deterioration and the stored M&R policy. The work planner tool also identifies the year the work
is required and estimate an M&R budget for each year. In addition to that, the ability to analyze
the consequence of various budget scenarios on pavement condition is availed. These capabilities
enable agencies to: (1) develop optimal M&R programs given available resources, and (2) justify
optimal M&R budget needs.
5.0 Database
The pavement database of the road network of the city of Chattanooga was provided by the
pavement department of the city of Chattanooga. The Principal Arterials data was selected for this
case study. The roadway of the city is divided into pavement sections. Each section is defined with
its surface type, address from/to locations, construction dates, maintenance and rehabilitation
history, etc. The road network of the city is defined with sixteen sub-networks. The data used for
the Principal Arterials comprise five sub-networks defined as follows: Network ID: COC-SA1-T1
is defined as: City of Chattanooga-Service Area1-Team1, the rest of the list is defined in the same
pattern. Each network ID comprises a number of branches and each branch contains few sections.
There is a total of 28 branches and a total of 201 sections as shown on Table 2. The Annual Average
Daily Traffic (AADT) is required for the creation of family models and it was obtained from the
Tennessee Department of Transportation (TDOT). Seven deterioration models were created based
on seven families. Each family represent a group of branches with the same range of traffic count.
An example of the trend of family 3 is presented in Figure 4.
Table 2: Principal Arterials network characteristics
network ID number of number of sections

branches
COC-SA3-T1 7 32
COC-SA3-T2 14 107
COC-SA4-T1 3 35
COC-SA4-T2 3 23
COC-SA4-T4 1 4
total 28 201
100
Legend
75
PCI 50
Outlier
25
Data point
0
0 5 10 15 20
Age
Boundary
Filter
Outlier
boundary
Figure 4: Deterioration trend of family 3
6.0 Condition analysis
The network condition evaluated for the next 10 years decreases from about PCI =73.69 in 2015
to about PCI= 62 in 2024 (an average of 1 point /year). The current condition (in 2015) is shown
in the bar graph (Figure 5), 55 sections (27%) are in good condition, 132 sections (65%) are in fair
condition, 16 sections (8%) are in poor condition, and no section (0%) are in failed condition. After
performing the analysis and predictions for 10 years, by 2024, only 12 sections (6%) will be in
good condition, 151 sections (74%) will be in fair condition, 32 sections (16%) will be in poor
condition, and 8 sections (4%) will be in failed condition.
180
160
Number of sections
140
120
100
Failed
80
60 Poor
40
20 Fair
0 Good
Analysis date
Figure 5: Pavement condition prediction summary
7.0 Maintenance and Rehabilitation (M&R) planning: Budget Analysis
The main objective of M&R planning is to maintain the pavement in good condition, extend its
life and reduce the major M&R backlog over time. In this perspective, the pavements are being
managed as cost effectively as possible through preventive maintenance and in frequent
rehabilitation projects. M&R plans were developed based on five different budget scenarios for a
five years M&R budget analyses to determine the impact of different funding levels on the City’s
pavement condition: (1) limited $132K, (2) limited $1M/YR, (3) unlimited, (4) budget required
for maintaining current condition, and (5) budget required for backlog elimination (Ammour,
2015). For each scenario, Micropaver output provides an economically viable work plan. After
generating maintenance needs for the pavement sections for each budget scenario, Micropaver
software makes a prioritized listing of pavement section projects on the basis of the sections PCI
results and distress information for the five future years.
7.1 Assumptions
The M&R budget analyses were performed on the basis of the database provided by the city.
Critical PCI value of 55 was set for the analysis. The M&R policies and the rates of different works
were taken as default from the Micropaver 6.5 along with an inflation rate of 3%. Table 3 to Table
7 show the funding results for each budget scenario (Ammour, 2015). Table 3 shows a decrease in
PCI from 73.64 in 2015 to 69.14 in 2019, and a backlog accumulation of unfunded M&R of $9
million in the last year. The prioritization results show that 9% of the sections will benefit from
“stopgap” maintenance, 17% from “preventive’ and the rest will not be repaired “do nothing”
because it is impossible to allocate the budget to all sections. Some sections that need maintenance
will be postponed to the next year for investigating the priority.
Table 3: Scenario 1 – Limited Budget of $132,000/year
Backlog
PCI Stopgap Preventive Total
Plan year PCI after accumulation
before funded funded funded
at the last year
2015 73.64 73.66 $6,332 $125,666 $131,997
2016 72.44 72.46 $7,667 $124,158 $131,825
2017 71.29 71.31 $10,653 $121,118 $131,772
2018 70.2 70.21 $16,327 $115,628 $131,955
2019 69.12 69.14 $23,888 $107,749 $131,637 $9,333,485
$64,869 $594,320 $659,189 $9,333,485
Table 4: Scenario 2 – Limited Budget of $1,000,000/year
Backlog
PCI Major above
Plan PCI Stopgap Preventive accumulation
befor critical Total
year after funded funded at the last
e funded
year
2015 75.0
73.64 5 $6,332 $254,897 $723,262 $984,492
2016 75.2
73.8 7 $7,667 $261,565 $725,713 $994,946
2017 75.4
74.02 7 $9,829 $269,757 $716,864 $996,451
2018 75.7
74.25 4 $15,009 $257,412 $715,396 $987,818
2019 76.0 $4,320,613
74.46 9 $21,897 $279,450 $691,540 $992,888
$60,735 $1,323,083 $3,572,778 $4,956,596 $4,320,613
Table 4 shows a slight increase in PCI from 73.64 in 2015 to 76.09 in 2019, the backlog
accumulation of unfunded M&R is $4 million on the last year. The prioritization results at the first
year show that 9% of the sections will benefit from “stopgap” maintenance, 74% from
“preventive”, and 5% from “major above critical”, the remaining section’s policy is “do nothing”.
To eliminate the existing M&R backlog over the next five years it was determined that a budget
of approximately $1.7M/YR is needed. Table 5 shows an increase in PCI from 73.64 at the
beginning of 2015 to 81.09 at the end of 2019 and 0.00 backlog accumulation. The prioritization
results for the first year of repair show that 67% of the sections will receive “preventive”
maintenance, 12% will not receive any repair, 12% will benefit from “major repair above critical”,
9% will benefit from safety M&R or “stopgap”.
Table 5: Scenario 3 – Backlog Elimination Budget
PCI Stopga Major under Major above

Plan PCI Preventive
befor p critical critical Total funded
year after funded
e funded funded funded
2015 76.5 $216,380
73.64 4 $6,332 $0.00 $1,517,305 $1,740,018
2016 78.4 $199,037
75.26 9 $7,667 $0.00 $1,524,417 $1,731,121
2017 80.1 $222,999
77.19 4 $8,093 $697,402 $798,009 $1,726,505
2018 80.7 $236,228
78.65 2 $8,272 $1,462,023 $0.00 $1,706,524
2019 81.0 $271,144
79.12 9 $0.00 $1,430,881 $0.00 $1,702,025
$30,36 $1,145,79 $3,590,308 $3,839,732 $8,606,195
5 0
The total funded budget needed to maintain the average current weighted PCI in all branches was
determined to be approximately $0.6M/YR. This budget scenario results in a slight decrease in
overall PCI from 73.64 to 71.88. M&R backlog on the last year is $8M (Table 6). The prioritization
results show that 9% of the sections will benefit from “stopgap” maintenance, 77 % from
“preventive”, and 2% from “major above critical” 2% at first year, for the rest of the sections the
policy is “do nothing”.
Table 6: Scenario 4 – Maintain Current PCI Budget
Major Major Backlog

Plan PCI PCI Stopgap Preventive
under above accumulation
Total
year before after funded funded critical critical at the last
funded funded year
2015 73.64 74.37 $6,332 $278,170 $0.00 $324,910 $609,413
2016 73.13 73.82 $7,667 $306,229 $0.00 $299,641 $613,538
2017 72.63 73.22 $9,829 $339,189 $0.00 $259,468 $608,487
2018 72.04 72.58 $14,959 $348,081 $21,791 $225,079 $609,912
2019 71.41 71.88 $21,844 $377,952 $0.00 $198,113 $597,910
$60,632 $1,649,622 $21,791 $1,307,214 $3,039,261 $8,154,952
With unlimited annual budget of $1.5M/YR and $6 M to spend in the first year, results show that
the pavement area‐weighted average PCI would increase from 73.64 in 2015 to 79.84 in 2016 and
no backlog of M&R will accumulate in last year (Table 7). The prioritization results show that at
first year, 55% of sections will benefit from “preventive” maintenance, 25% from “major above
critical”, 8% from “major bellow critical”, for the rest of the sections the policy is “do nothing”.
In this scenario, M&R expenditure is optimized by using the M&R pavement section assignment
such as if the section PCI is equal or above critical apply localized or global preventive. If section
PCI is bellow critical apply localized safety or major M&R.
Table 7: Scenario 5 – Unlimited Budget $1,500,000/YR
Major
PCI Major under Backlog
Plan PCI Preventive above
befor critical Total accumulation
year after funded critical
e funded at the last year
funded
2015 73.64 84.8 $6,255,96
9 $154,126 $2,410,698 $3,691,142 7
2016 83.53 83.6
9 $186,457 $0.00 $0.00 $186,457
2017 82.11 82.2
6 $222,999 $0.00 $0.00 $222,999
2018 80.55 81.2
5 $236,228 $379,874 $0.00 $616,102
2019 79.53 79.8
4 $271,889 $64,573 $0.00 $336,463
$1,071,70 $2,855,146 $3,691,142 $7,617,99 $0.00
1 0
The economic consequences of each annual budget scenario are summarized in Table 8.
Considering that both annual M&R expenditures and the remaining M&R backlog are treated as
costs incurred by the City, then the total overall cost to the City is less if the City eliminates its
backlog with a budget of $1.7M/yr. The unlimited budget would be the ideal, but requires spending
6 million dollars in the first year which is not available. It is not possible to achieve a perfect
network because each year the percentage of PCI on streets will drop because of the usage. If it is
determined that the network PCI should be maintained at the current level, then we have the
consequence of maintaining current PCI option to be able to show the cost required to maintain. If
it is determined that there is a limited budget each year, then the consequences of the budget
restriction are shown as long as the best benefit is achieved with the lowest cost (B/C ratio).
Table 8: Summary of Estimated Five Year Pavement Major M&R Budget Costs
Total five year Remaining

Total five
M&R M&R Cost
Budget scenario year costs
costs(2015- backlog differential
(2)
2019) (2019) (1)
Unlimited $1.5 M $7,617,990 $0 $7,617,990 Baseline
Backlog Elimination $1.7M $8,734,624 $0 $8,734,624 $1,116,634
Limited Budget $1M $5,000,000 $4,320,613 $9,320,613 $1,702,623
Limited Budget $132K $660,000 $9,333,485 $9,993,485 $2,375,495
Maintain Current PCI $ 0.6
$3,681,424 $6,831,526 $10,512,950 $2,894,960
M
(1) “M&R Backlog” equals the lump-sum cost to resurface/reconstruct all pavements at or below
the critical PCI value.
(2) “Total five years cost” equals the sum of the five years Major M&R expenditures plus the
remaining Major M&R backlog at the end of the five years analysis period.
The comparison of the five budget analyses is illustrated in Figures 6 and 7. Figure 6 shows the
change in pavement condition over the five years for each budget scenario analyzed. The backlog
elimination scenario will increase the Area Weighted PCI over the five-year analysis compared to
the rest of the budget scenarios. The bar chart on Figure 7 shows the unfunded M&R effects for
each budget scenario during the five-year analysis. The backlog elimination budget will eliminate
the backlog at the end of year 2019, the limited budget $132K and maintain current PCI budget
will increase the backlog over the five years, while backlog elimination budget significantly
decreases the backlog over the five years of analysis. Limited budget $1M will slightly increase
the backlog and the unlimited budget do not create any backlog of M&R during the five-year
analysis. Table 9 sows a summary of the five budget scenarios change in PCI and backlog
accumulation. More information can be obtained from Ammour (2015).
90
Limited Budget
80
$132k
Area Weighted PCI 70
Limited Budget
60
$1M
50
Backlog
40
Elimination Budget
30
20 Unlimited Budget
10
0 Maintain Current
PCI Budget
3/25/2015 3/25/2016 3/25/2017 3/25/2018 3/25/2019
Analysis Year
Figure 6: Comparison of Pavement Condition for the various Budget Scenarios
$10,000,000.00
Limited Budget $132K
Total Unfunded M&R
$8,000,000.00
Limited Budget $1M
$6,000,000.00
Unlimited Budget
$4,000,000.00
Backlog Elimination
$2,000,000.00
Budget
Maintain Current PCI
$0.00
Budget
Analysis Year
Figure 7: Effect of Budget on Total Pavement M&R Backlog
Table 9: Summary of budget scenarios analysis in a period of five years
Budget scenario Backlog

PCI before PCI after
accumulation
Limited budget of $132,000/YR 73.64 69.00 $9M
Limited budget of $1M/YR 73.64 76.09 $4M
Backlog Elimination budget of 73.64 81.09 $0.00
$1.7M/YR
Maintaining current PCI budget of 73.64 71.88 $8M
$0.6M
Unlimited budget of $1.5M/YR 73.64 79.84 $0.00
8.0 Conclusion
This case study was performed using the Micropaver Pavement Management System software to
determine a cost effective maintenance and rehabilitation policy for principal arterials in the City
of Chattanooga. Seven deterioration models were created to predict the condition of individual
pavement sections. Results indicated that PCI decreases from about 73.69 in 2015 to about 62 in
2024 assuming no major M&R are performed. The overall pavement condition is fair during the
10 years.
Budget analysis was conducted using five different budget scenarios with the objective to maintain
a satisfactory overall pavement condition and reduce major M&R backlog overtime (Figures 6 and
7). Each budget scenario gives a cost-effective work plan, and maintenance needs were generated
for the 201.
M&R expenditure is optimized by using the M&R pavement section assignment such as if the
section PCI is equal or above critical PCI apply localized or global preventive. If section PCI is
bellow critical apply localized safety and major M&R.
The ideal budget scenario is the one which eliminates backlog over the five years of analysis and
increase the condition of the pavement sections investigated (Table 9). Nevertheless, the economic
consequence of the five budgets is that, it gives options to the city to choose from. Each budget
scenario gives a different choice for the city’s pavement management based on either engineering
decisions or political decisions. The idea is to get the best benefit which is increasing the PCI over
the analysis period at the lowest cost possible.
References
ASTM. D 6433-07 (2007). Standard Practice for Roads and Parking Lots Pavement Condition
Index Surveys. American Standards for Materials and Testing ASTM D 6433-07.
Ajay K. S. (2014) "Development of a Sustainable Transportation Infrastructure Management

System for a Typical College Campus". Digital Commons@URI.
Ammour Saliha (2015). Pavement Management Analysis of Arterial Roads in the City of
Chattanooga using Micropaver, M.Sc. Project, University of Tennesse at Chattanooga Library,
Tennessee, USA 2015.
Bryar Q.A. (2013). Developing of Pavement Management System (PMS) for EMU Campus
Pavement in GIS Environment", M.Sc. Thesis, Eastern Mediterrenian University, Gazimagusa, N.
Cyprus.
i-rep.emu.edu.tr:8080/jspui/bitstream/11129/1582/1/Ahmed.pdf.
City of South Burlington.(2004). Pavement Management Study. Draft report.
City of Palm Springs, Ca. (2008). Pavement Management System. A comprehensive report on the
current
condition of city streets. http://www.palmsprings-ca.gov/home/showdocument?id=1441.
DYNATEST Consulting Inc. (2012). MicroPAVER Implementation and Pavement Condition

Index (PCI) Survey Project. State of the Streets Report including MicroPAVER. Technical
Documentation Prepared for City of Mandan, North Dakota.
http://www.cityofmandan.com/vertical/sites/%7B38C3
EFDC-F4D8-4D02-9E13-
0987A081A7A4%7D/uploads/2012.11.13_Mandan_State_of_the_Streets_Technical_Report_Fin
al_V1.pdf.
Kmetz R.J. (2011) GIS Based Pavement Maintenance: A Systematic Approach, Purdue e-Pubs,
Purdue University.
http://docs.lib.purdue.edu/cgi/viewcontent.cgi?article=1036&context=techdirproj.
Moazami D, Muniandy R, Bin Hamid H, Bin Md Yusoff Z. (2010). "Developing a Comprehensive

Pavement Management System in Tehran, Iran Using MicroPAVER". EJGE, 1782-1792.
Rajagopal A. (2006). Developing pavement prediction models and decision trees for the City of
Cincinnati. Report No.FHWA/OH-2006/14, Cincinnati, Ohio.
Sen Trisha (2013). Pavement Management Analysis of Hamilton County Using HDM-4 and
HPMA, M.Sc. Thesi, University of Tennessee at Chattanooga Library, Tennessee, USA.
Shahin M.Y. (2001). "US Army Construction Engineering Research Laboratory, Pavement
Management- MicroPAVER Update" 5th International Conference on Managing Pavements,
2001.
Managing environmental collaborations at business schools by projects:

Possibilities and a way forward
N Purushottam
University of South Africa (UNISA), South Africa
purusn@unisa.ac.za
P D Rwelamila
University of South Africa (UNISA), South Africa
rwelapmd@unisa.ac.za
Abstract
The paper is a preliminary review based concept paper which attempts to contribute to the debate
in the area of application of project management in designing and managing environmental
collaborations. This paper examines the literature in the area of environmental initiatives at the
business schools. It emerged in the review that environmental initiatives at business schools
involves environmental collaborations (ECs) with multiple partners and stakeholder. The review
of related literature also identifies complexity in due to multiplicity is contributing to several
challenges in successfully managing these ECs. Literature on application of project management
in managing Environmental collaborations at business school is identified as an under explored
area. The paper presents possibilities of using project management as a tool to effectively design
and implement ECs at business school and advances emerging pertinent research questions for
further exploration.
Keywords: Environmental collaborations, business schools, project management, possibilities
Introduction
Interdependence among humans, business, ecosystem and society is undisputable (Bradbury,

2003). However, not respecting interconnectedness contributed to the growing magnitude of
sustainability challenges like “financial, food and climate” (p4, United Nation, 2012) which has
forced society to realise the urgency and reprioritize developmental agenda of its institutions. This
interdependence has also contributed to the multi-faceted and complex nature of sustainability
issues (Dentoni and Bitzer, 2015). As a result, initiatives to address sustainability issues demand
interconnectedness and multiplicity of interventions (Starik, 2004). The journey towards
sustainability requires active participation of many institutions of society like higher education
institutions (Blewitt, 2010). Institutions of higher education create and disseminate knowledge and
hence are vital in leading radical change towards sustainability (Bloom, Canning and Chan 2005).
One such higher education institutions are business schools (Napier, Harvey and Usui, 2008).
Environmental, social and financial are three dimension of sustainability (Bridges and Wilhelm,
2008). However, this paper will focus only on the environmental sustainability.
Business schools become more active towards environmental sustainability issues under the
pressures of environmentally conscious consumers, environmental skills seeking businesses,
governments and civil society (Leal Filho, 2000; Stephens et al. 2008; Borin and Metcalf, 2010).
Finite nature of resources and consequences of climate change are creating critical situations;
understanding which business schools are working towards addressing environmental challenges
(Slater and Dixon-Fowler, 2010). The scope of these business schools initiatives is wide range and
multilayer which makes business schools to collaborate with other institutions or players in the
area of environmental sustainability. The complexity and dynamism of these collaborative
initiatives has been identified challenging for business schools (Adams and Petrella, 2010).
On this backdrop, this paper is developed. The paper is a review based concept paper which
examines theoretical domains of environmental practices at business schools though the lenses of
environmental collaborations (ECs). It further explores project management domain to build an
argument and a way forward for considering ECs as projects. It attempt to explore possibility for
application of project management principles during building and manging of portfolio of ECs.
The paper starts by reviewing environmental initiatives in business schools which involves
multilevel partnerships with multiple stakeholders, introduces ECs in business schools and
presents complexity of portfolio of ECs. In the next section, it examines challenges faced by
business schools in managing ECs. In third section, it brought forth the importance of applying
project management principles in order to avoid or manage these challenges. It identifies that the
ECs initiatives at the business schools display characteristics of a project by drawing similarities
between ECs and projects. In the last section it ends with presenting the possibilities of application
of project management principles in building and managing ECs.
Environmental sustainability initiatives and environmental collaborations at business schools:
The growing urgency to address sustainability challenges has created a demand for sustainability
specialists which motivated business schools to participate in addressing environmental
sustainability issues (Arnold, 1993; Adams et al. 2011). Moreover, growing strategic focus of
universities on environmental issues and pressure of accreditation agencies also contributed in
creating a push force for business schools to take initiatives in this direction (Adams and Petrella,
2010). The environmental initiatives at business schools vary across the world. Jabbour (2010)
highlighted that these initiatives cover providing green education which is related to preparation
of green curricula (Kaemerle, 2003); converting campuses green and operations environment
friendly (Sharp, 2002); researching environmental problems (Barnes and Phillips, 2000);
participating in community outreach and engaging with community in solving these issues (Leman
Stefanovic, 2008).
Review of literature in the area of business school environmental sustainability initiatives suggests
that different environmental initiatives at business schools involve different partners and different
approaches. Green curricula development initiatives goes through interdisciplinary and
international approach (Wilhelm, 2008) and needs collaboration with other departments of the
university and businesses (Arnold, 1993; Kurland et al. 2010). Moreover, business schools
differentiate w.r.t. scope of greening of curricula which ranges from offering full degree program
to including environmental sustainability issues as one of the topic in some courses (Holt, 2003;
Amran et al. 2010; Rusinko, 2010; Vishwanathan, 2011). These variations suggest that degree of
collaboration differs across the scope of initiatives. Under green campus management initiatives,
business schools collaborate with multiple stakeholders in the areas of energy, water, food,
transportation, waste and sustainable landscaping (Calder and Dautremont-Smith 2009; Jain and
Pant 2010). Initiatives in the area of research cover collaborations with governmental agencies,
businesses, civil society and funding organizations (Dentoni and Bitzer, 2015). Community
engagement and outreach involves collaboration with NGOs, local communities and other
stakeholders (Barnes and Phillips, 2000; Zilahy et al. 2009).
It is interesting to observe that environmental initiatives management demands multiple skill sets
which require collaborating with multiple partners. These multi-level, multi-partner,
environmental sustainability oriented initiatives are called ‘Environmental Collaborations’ (EC)
by Wassmer, Paquin and Sharma (2012). If the definition of ECs is applied in business school
context, it will be a partnership between business school and “one or more other organizations
with the goal of reducing negative or generating positive environmental impact” (p 756, Wassmer,
Paquin and Sharma, 2012). The range of environmental initiatives at business schools covers
collaboration with businesses, students and alumni bodies, other business schools,
faculties/departments within university or outside their own university, NGOs, government and
civil society organizations to name a few (Lacy, Haines and Hayward, 2012). The scope of
collaboration at business school varies from small local partnerships to regionally significant
collaborations (Barnes and Phillips, 2000). However, it is also worthwhile to mention that besides
multitude of initiatives at business schools, the sustainability and success of green initiatives
management in business schools is still considered challenging.
Issues in management of ECs at business schools
The management of EC in business schools is influenced by lack of clear goals, inefficiencies of

practices, shortage of funding (Richardson and Lynes, 2007), entrepreneurial role of leader,
motivation of team, acceptance towards organizational change, degree of flexibility in the rigid
structure of old education institutions to accommodate environmental collaborations (Jabbour,
Sarkis, Jabbor and Govindan, 2013). The collaborations face difficulties also due to the presence
of different business and environmental objectives among multiple partners and also due to the
differences in organization culture of these partners (Jabbour et al. 2013; Wassmer, Paquin and
Sharma, 2012; Cornuel, 2007). Another challenge in managing ECs is a daunting requirement to
play multiple roles by participants like academics in such collaborations need be juggle among
roles of knowledge expert, agenda setting advisors, facilitators and developer of new knowledge
and new partnerships (Dentoni and Bitzer, 2015).
It seems that the multilevel and multisystem nature of environmental collaborations (Starik and
Rands, 1995) and interdependence among people, processes and structure add to the complexity
which makes management of EC challenging (Disterheft et al. 2015). It was observed that
successful management of ECs requires participatory skills among the partners and structural
support from various stakeholders (Disterheft, Caeiro, Azeiteiro, and Leal Filho, 2015).
Researchers like Wassmer, Paquin and Sharma (2012) highlighted that the management of ECs
should not be done in seclusion but ECs should be managed as portfolio of collaborations. These
researchers (Disterheft et al. 2015) also identified that effective management of portfolio of ECs
is important but an under researched area.
Prospects of managing environmental collaborations through project management principles:
Projects are defined as temporary, transitory and dynamic organization (Shenhar, 2001; Lundin,
1995) and these characteristics make them an effective candidate to implement ECs in business
schools. Projects are effective in dynamic and complex situations (Yiu, 2008), in ensuring effective
utilization of resources and in integration of interests of various stakeholders (Cicmil, 1997) which
are identified critical for managing ECs. Literature suggests that treating ECs as projects promises
sustainability and quality of the outcomes as it involves top management, ensures progress towards
meeting partnership objectives of stakeholders, and efficient utilization of resources (Mckee et al.
2009). Managing ECs as projects can be effective due to proven ability of project management
principles in handling networks of multiple organisations (Yiu, 2008) and stakeholders (Cicmil,
1997)). Moreover, application of project management principles in building ECs challenge
conventional “silo thinking" among various internal stakeholders like top management,
administrative staff, students and faculty which eventually helps in simultaneous managing of
multiple GCs projects (Dinsmore, 1999). ECs seem like a strategic change to the business schools
and projects are effective in implementing strategic change in organizations (Artto, et al. 2008;
McElroy, 1996).
Literature reviewed in earlier sections indicates that ECs at various business schools varies w.r.t.
complexity and autonomy. Designing and managing ECs as projects facilitates addressing of
degree of autonomy and degree of complexity related to stakeholders’ involvements (Artto, et al.
2008). Reviewed literature so far suggests that managing ECs as projects brings strategic focus,
ensures top management involvement, targets specific objectives, demarcates clearly expectation
and responsibilities of stakeholders, brings transparency with respect to resources used by each
EC, provides clear point of beginning and above all indicates clear ending for each EC.
Managing environmental collaborations through project management principles: Emerging
research themes
It is interesting to observe that researchers often called various green initiatives at business schools
as projects like green curriculum (Kurland et al. 2010), green campus management (Ryan et al.
2010) and community outreach (Leman Stefanovic, 2008). However, they hardly explored
application of project management principles in managing these projects. From the discussions in
earlier sections, it clearly emerged that the potential of application of project management principle
in managing ECs at business schools is high. It is important to mention that the issue of application
of project management principle in management of ECs is a broad area. The research themes
captured here are just a few possible lines of enquiries which are captured to stimulate thought
process and proactive actions in this direction. These research enquiries regarding the possibilities
of application of project management principles in ECs are clubbed under curriculum development,
research, campus management and community engagement and outreach. In the light of
discussions so far following are the main line of enquires in-front of business schools in application
of project management principles which may help in shaping future research agenda:
It is interesting to notice that green campus management is usually considered as university level
initiative (Alshuwaikhat and Abubakar, 2008). A detailed discussion of how green campus
management at university level can be handled as project is given elsewhere (Rwelamila and
Purushottam, 2015). However, it is important to investigate how business schools are collaborating
with other departments of the universities, suppliers and students to build and manage green
campuses?
Environmental initiatives are studied mostly from the perspectives of greening of curriculum (Page
and Collins, 2010; Smith, Hart, and McCloskey, 1994). Creation of environment sustainability
oriented curriculum through project approach may bring learnings from interdisciplinary learning
and ensure effective and balanced curriculum (Kurland et al. 2010). Therefore, there is a need to
understand how ECs in green curriculum development can be built and managed through project
management approaches? How interdisciplinary green curriculum development and learning can
be managed without sacrificing the core of business education? How contextual insights and
feedback from industry and businesses can be incorporated in green curriculum project?
Research on environmental issues in business schools has been a neglected area which demands
transdisciplinary research (Coopey, 2003). The research also suggested effectiveness of centres to
facilitate the collaborative research process. It would be interesting to see how various research as
projects can be managed through project management principles and governance.
Collaborations among NGOs, government organizations and education institutions are

cumbersome and not free from risk (Leman Stefanovic, 2008) but risk management as integral part
of project management which can be handy in addressing these issues. Therefore, it is important
to identify risk associated with environmental community engagement and outreach projects and
to provide a mitigation plan under the domain of project management.
On prima facie, it seems that application of project management principles and approaches can
contribute in managing ECs at the business schools. However, there is a need for several field
based research studies to explore the raised research enquires. Therefore, this paper contributes to
the environmental initiatives of business schools by suggesting an alternative tool to make their
ECs more objective oriented, efficient, accountable, and satisfactory for all involved stakeholders.
This paper also contributes to the developing research stream on environmental sustainability and
business schools.
References
Adams, C. A. Heijltjes, M. G. Jack, G. Marjoribanks, T. and Powell, M. (2011). The development

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TRACK 10
Graduate Student Paper
Factors Influencing Customers’ Intention to ‘Port’ Mobile Numbers in the
Nigerian Mobile Telecommunications Industry
Ojiaku, Obinna. C
Department of Marketing
Nnamdi Azikiwe University, Awka, Anambra State
2348062678341 email: ohbeena@gmail.com
Nwaizugbo, Chukwudi. I
2348033389074 ic.nwaizugbo@unizik.edu.ng
Olise, Moses. C
2348036700014 mchigbata@ymail.com
Abstract
Mobile Number Portability was implemented to allow customers switch from one GSM provider
to another without changing their phone number. MNP was introduce to improve the quality of
service, encourage healthier competition, reduces switching cost and address the problem of
multiple-SIM. Despite its launch the rate of adoption is dismal, as such quality of service is yet to
improve and multiple-SIM culture has continued to surge. This paper investigates factors
influencing customers’ intentions to ‘port’ mobile numbers in the Nigerian mobile
telecommunication market. The study specifically seeks to investigate the effect of service quality,
satisfaction, switching barrier and multiple-SIM on customers’ porting intention. Responses from
363 subscribers was analysed using simple percentages and descriptive statistics from a cross-
section of subscribers in Anambra state. Regression analyses were used to test the hypotheses. The
result confirms the effect of service quality, customer satisfaction, switching cost and alternative
attractiveness on porting intention. However, the effect of multiple-SIM was not confirmed.
Additionally, demographics effects of age and occupation was found to influence porting
intentions. Accordingly, it was recommended that regulatory efforts should be geared towards
increasing consumer education on MNP, licensing of universal SIM to allow subscribers port
between operators using short codes. Also, from the managerial perspective, it was recommended
that efforts should be made to improve service quality and attractiveness of the brand.
Keywords: Mobile Number Portability, Switching cost, multiple-SIM, service quality,
telecommunications, Nigeria
1 Introduction
The liberalization and deregulation of the Nigerian telecommunication industry in 2001 brought
about unprecedented growth in the telecom market with over 148 million active mobile lines, a
tele-density of 104 per cent and contribution of more than 10 per cent to the nation’s Gross
Domestic Product (GDP) (Okonji, 2015). In recent times, the industry has witnessed increased
competition on the one hand while on the other hand, consumer dissatisfaction with the quality of
services, tariff rate and network coverage as started to emerge as evidenced in the growth of
‘multiple-SIM’ handset that enable consumers switch between providers in order to enjoy better
deals and services as they fluctuate. Consequently, in order to improve the quality of service,
encourage healthier competition and address the ‘multiple-SIM’ scenario the regulatory authority
launched the Mobile Number Portability (MNP) in April 2013. The introduction was greeted with
the controversial ‘saka saga’1 in the wake its launch. Park, Kim & Lee (2007), defined Mobile
Number Portability (MNP) as the ability of users of telecommunication services to retain existing
telecommunication numbers including the prefix without impairment of quality, reliability, or
convenience when switching from one telecommunication carrier to another. However, the
introduction of MNP has had minimal impact on competition due to its low adoption rate. For
instance, the figure released by NCC for porting operation between May 2013 and January 2015
shows that only about 234,880 subscribers have ported their numbers, a figure described as dismal
and incongruous compared to other countries considering the number of active mobile lines of
about 148 million (NCC Q1 Report, 2015). A number of reasons have been attributed to the slow
progress of the scheme including slow porting process, multiple-SIM culture among subscribers
(Okwuke, 2014), and perceived homogeneity of network operators.
Typically, most subscribers use multiple-SIM to switch between GSM providers in order to escape
from service quality issues and take advantage of discounted pricing (Sutherland, 2008). This
development has led to the growth and proliferation of dual-SIM handsets especially with the low
cost of obtaining a new SIM. Anecdotal evidence show that multiple SIM phenomena makes it
difficult for mobile operators to track switching behavior and impedes on the success of customer
retention programs with direct impact on profitability and effectiveness on the one hand, and from
the subscriber perspective only one mobile number can be recalled from memory which is often
referred to as the ‘main line’ (i.e., the mobile number the subscriber is accustomed to) while other
lines are used to take advantage of better services or promotional offers (Tiamiyu & Mejabi, 2012).
Notwithstanding the rationale for multiple-SIM scenario it is expected that the introduction of
MNP will reduce this incidence as subscribers can now switch between operators to enjoy
improved quality of service and promotional offers and still retain their numbers (Sutherland,
2008). The incidence has however continued to surge.
The successful implementation of MNP has been associated with high porting rate to confirm the
demand for the service and the utilization of the facility (Lago, 2007; Iqbal, 2010). In contrast,
Iqbal (2010) argued that the successful implementation of MNP cannot be measured only by the
high porting rate but also by the improvement in competition and quality of service and lower
tariff. Be that as it may, competition and quality of service may not have improved nor tariff rate
dropped significantly. Moreso, implementing the MNP facility is technical costly with the benefits
achieved by its introduction far lower than the cost as such subscribers should be willing to port
their mobile numbers otherwise adopting the MNP facility will be a mere economic waste (Iqbal,
2010). Thus, it is therefore imperative to ascertain the determinant of customers’ intentions to ‘port’
mobile number especially in the era of proliferation of ‘multiple-SIM’. Specifically, this paper
seeks to investigate the effect of switching barrier, satisfaction, service quality and the incidence
of multiple SIM on porting intentions. Our study makes some novel contribution to the scholarly
discussion on mobile telephony and MNP. To the best of our knowledge this is the first study to
empirically investigate the effect of multiple-SIM on customer switching especially in the context
of MNP.
2 Review of Related Literature
2.1 Mobile Number Portability
Mobile Number Portability (MNP) is a network facility that allows mobile subscribers to retain
their phone number when they move from their current service provider to another service provider.
MNP allows subscribers to keep their phone numbers which usually serves as a customers’ unique
identifier when they change operator. According to Park et al. (2007) MNP is the ability of users
of telecommunication services to retain existing telecommunication numbers including the prefix
without impairment of quality, reliability, or convenience when switching from one
telecommunication carrier to another. By implication with MNP, the network prefix will no longer
be identified with their respective networks especially for ported numbers as the propriety right to
phone numbers will now be transferred to the customers (Buehler, Dewenter & Haucap, 2005).
MNP became necessary as a matter of regulatory imperatives to enhance competition and improve
customer welfare by lowering switching cost (Sutherland, 2007; Dick & Basu, 2004). Empirical
evidence suggest that MNP enhances competition in the supply of value-added services and as
competition intensifies service quality improves, tariff and multi-SIM culture reduces and the
market grows (Viard, 2007; Ovum, 1997; Oyeniran & Akinsola, 2012). MNP provides a number
of benefit to customers including cost saving of retaining phone numbers, cost savings arising from
switching to a more efficient or better operator, improvement in service quality and price reduction
arising from improved competition (NERA/Smith, 1998). On the other hand, MNP makes it
difficult to identify a network a caller is placing a call and also erodes consumer price information
with respect to termination charges for off-net and on-net calls (Buehler & Haucap, 2003).
However, in countries where MNP has been implemented the benefit has been reported to
outweigh the cost for customers (NERA/Smith, 1998; Buehler & Haucap, 2003).
2.2 Conceptual Framework and Hypotheses Development
2.2.1 Service Quality
In every service industry, the level of service quality is a significant differentiator and a great
competitive weapon which all firms strive to achieve. Service quality is evaluated based on the
magnitude and direction of the gap between the customer’s expectations of services and customer’s
assessment (perception) of the service actually delivered (Parasuraman, Zeithaml, and Berry,
1988). According to Parasuraman, Zeithaml, and Berry (1988), service quality consists of five
dimensions: reliability, tangibles, responsiveness, assurance, and empathy which have been
empirically demonstrated to be valid and reliable constructs for measuring perceived service
quality (Cronin & Taylor, 1992; Soteriou & Chase, 1998). Several empirical studies confirmed
that a higher level of service quality was related to a higher level of customer satisfaction (Brady
& Robertson, 2001; Cronin, Brady, & Hult, 2000). In earlier studies on mobile telecommunication
services, service quality has been measured by call quality, pricing structure, mobile devices,
value-added services, convenience in procedures, and customer support (Kim, Park & Jeong, 2004;
Gerpott, Rams & Schindler, 2001; Lee, Lee, & Freick, 2001). Accordingly, the following
hypothesis is proposed:
H1: Poor service quality will be significantly related to customers’ intention to
‘port’ mobile numbers.
2.2.2 Switching Barrier
Switching barriers are the difficulty that confronts dissatisfied customer when changing providers
or the financial, social and psychological burden felt by a customer when switching to a new carrier
(Fornell, 1992). Consumers are forced to remain with their existing operator as long as they
continue to encounter switching barrier. In the present study, switching barrier is made up of
switching cost, and the attractiveness of alternatives.
Switching costs are the cost borne by customers when changing provider such as the time, money
and psychological cost (Dick & Basu, 1994). With respect to mobile telephony, customers’
switching intention drops due to perceived time, energy, money, and hassles involved in switching.
For new entrants, the prevalence of switching cost reduces the chances of winning over subscribers
from other networks. Though MNP is believe to lower switching cost, it however comes with its
inherent switching cost with respect to porting time, porting procedure and the psychological cost
customers will have to incur to port their number. Accordingly, the following hypothesis is
proposed:
H2a : Higher level of switching cost will have a significant negative effect on
customers’ intention to ‘port’ mobile numbers.
Attractiveness of alternatives refers to the extent a competing service provider is better or more
superior than existing service provider with respect to image, reputation, value-added services,
promotions and prices amongst others (Kim et al. 2004). If customers perceive that the existing
alternative providers are similar and few, then they feel constrained to remain with the existing
provider. Conversely, to the extent that alternative service providers are perceived to be attractive,
consumers are less likely to feel “locked in” with their current service providers, which increases
the likelihood of switching (Bansal, Irving & Taylor, 2004; Kim et al, 2004). In a study on
customer churn, defected customers gave reasons of better price and promotion among others as
reason for switching (Lawford, 2005). Accordingly, the following hypothesis is proposed:
H2b: The stronger the attractiveness of alternative provider the stronger the
consumers’ intention to ‘port’ their mobile numbers.
2.2.3 Satisfaction
Customer satisfaction refers to customers’ assessment of all interactions or use situations they have
with a product or services relative to their expectations (Jeng & Bailey, 2012). Customers evaluate
their satisfaction with a service based on their cumulative experience with the service provider
(Olsen & Johnson, 2005). Such evaluation can be based on the service consumed or comparative
to alternate brands (Chuang, 2011). Customers might experience dissatisfaction with specific
encounters or service usage such as call drop, poor network but may not churn (Ahn, Han & Lee,
2006). However, when customers retrospectively evaluate all encounters or use situation and
compare to alternate brands their intention to churn increases or decreases (Gerpott et al. 2001).
Previous studies has found a relationship between customer satisfaction and consumers’ attitude
or behavior towards switching mobile carriers (Shin & Kim, 2008; Kim et al. 2004; Gerpott et al.
2001; Chuang, 2011). Accordingly we proposed the following hypothesis:
H3: Higher levels of customer satisfaction will negatively influence customers’

intention to ‘port’ mobile numbers.
2.2.4 Multiple SIM
In the context of mobile telecommunication, customers’ use multiple-SIM as a variety seeking

behavior. Multiple SIM usage enable customers to escape from problems associated with service
quality and pricing structure and take advantage of deals from operators (Sutherland, 2008;
Tiamuyi & Mejabi, 2012). However, MNP introduction was expected to reduce the incidence of
multiple-SIM, the situation seems to have exacerbated inspite of MNP introduction. Multiple SIM
scenarios distort the success of customer retention program with direct impact on profitability and
effectiveness (Tiamuyi & Mejabi, 2012) and from the policy perspective impedes on proper
accounting of mobile penetration (Sutherland, 2008).
Given that the cost of obtaining a new SIM and running parallel account is relatively cheaper than
porting mobile number, we expect multiple SIM to negatively affect porting intention (H4).
Therefore, the following hypotheses are proposed:
H4: Multiple SIM will negatively influence customers’ intention to port mobile
number.
2.2.5 Consumer Demographics
Consumer demographics include a number of individual socio-economic characteristics that

distinguishes consumer groups. A considerable body of empirical research has construed
demographics as predictors of technology adoption with differing results (Kolodinsky, Hogart &
Hilgert, 2004; Naseri & Elliot, 2011; Okeke, Opara & Ojiaku, 2015; Shin & Kim, 2008; Gilbert,
Lee-Kelley & Barton, 2003). For instance Shin & Kim (2008) found age to directly impact on
switching intentions with younger subscribers more prone to switching. However, Ranaganathan,
Seo & Babad (2006) found a negative link between age and switching. With respect to gender,
men are more likely to adopt technology than female. Female consumers tend to have heightened
anxiety when it comes to adopting new technologies (Gibert et al. 2003) and are less likely to
switch. Generally, gender have not been found to be positively linked with technology adoption
or switching (Shin & Kim, 2008; Kolodinsky et al. 2004; Okeke et al. 2015; Nimako & Nyame,
2015). Research has also linked higher education with technology adoption, with educated
consumers showing more self-efficacy and more likely to adopt (Naseri & Elliot, 2011;
Kolodinsky et al. 2004; Shin & Kim, 2008). However, Nimako & Nyame (2015) found a
nonsignificant effect for education on switching. Occupation is scarcely included in studies on
technology adoption or switching intention. Naseri and Elliot (2011) found that consumers in
managerial or professional occupations were more likely to adopt technology. We expect
occupation to influence porting intentions. Therefore we propose the following hypotheses:
H5: Age exerts a negative influence on subscribers porting intention.
H6: Male subscribers are more likely to port their mobile numbers than female
subscribers.
H7: Subscribers with higher levels of education are more likely to port than
subscribers with lower level of education.
H8: Subscribers’ occupations will significant influence porting intention.
2.2.6 ‘Porting’ Intentions
Porting intention refers to consumer switching intention with respect to number portability. It
describes subscriber’s intent to defect from a current provider to another provider while retaining
their unique identifier (e.g., mobile numbers, personal identification numbers, or accounts
numbers) known with a current service provider. Porting transfer rights associated with specific
identifiers from providers to consumers. Zeithaml, Berry and Parasuraman (1999) defined
consumer switching intentions as the indicators that signal the chances of a customer remaining
with or defecting from a service provider. It involves the intention of discontinuing with the use
of the services of a current provider in exchange for another provider (Bansal & Taylor, 1999).
Under the MNP, consumers retain their identity (mobile number) with their current service
provider while they move their subscription to another service provider. It is expected that the
factors influencing consumer switching intentions will also influence consumer ‘porting’
intentions.
3 Research Method
This study employed survey design method using individuals as unit of analysis to test the
proposed model. The survey was conducted on a cross section of participants who are mostly
resident in Anambra, Southeast, Nigeria.
3.1 Sample and Procedure
The survey was self-administered to a proportionately stratified sample of mobile phone users
across Awka, Onitsha and Nnewi in Anambra State. Data was generated from 386 respondents
using trained interviewers between the periods July/August, 2015. The survey was restricted to
mobile phone users for voice services mainly. The survey setting is characteristically diverse with
respect to participants’ socio-economic profile. The sample was fairly distributed with 57% male
and 43% female, 60% with more than a bachelors’ degree, mostly aged between 25 to 40 years of
age (53%). While about 40% are civil servants and 22% self-employed.
3.2 Research Instrument
The instrument designed for this study consists of 5-point likert-scale from 5 - strongly agree to 1
strongly disagree. The items were adapted from previous studies. Service quality was measured
using four items adapted from Kim et al. (2004). Switching cost measurement scales consist of
seven items adapted from Chuang (2011). Attractiveness of alternative was measured using 5 items
adapted from Chuang (2011) and Kim et al. (2004). Satisfaction measure used four items
consistent with extant literature approach to measuring customers’ satisfaction. Multiple-SIM was
measured using measurement scale adapted from variety seeking orientation literature by Jung and
Yoon (2011), Bansal, Taylor & James (2005) and some items developed for the study by the
researchers – 5 items. Porting intention was also measured using a total of five items adapted from
Shin and Kim (2008) and Bansal et al. (2005).
3.3 Method of Data Analysis
Data collected were analysed using SPSS version 17 to generate needed information and findings
using descriptive statistics; Principal component analysis was also performed to reduce the data
and test for commonality while and Regression Analysis was used to test the proposed hypotheses.
The construct reliability was tested using confirmatory factor analysis (CFA) with cronbach alpha
> .70 while validity was done by senior academics in marketing department of a University.
4 Results
4.1 Factor Analysis
The Principal component analysis was computed with varimax rotation, set at eigenvalue greater
than one and factor loadings greater than 0.5. Table 2 shows that all the variance in the construct
was more than 60% and all the reliability of the measurement items were above 0.70. Three items
with loadings below 0.5 were deleted to enhance and improve the constructs reliability and to also
obtain an optimal result. Summary of the factor analysis and reliability measurement is shown in
table 4.2 below.
Table 4.2 Factor loading, explained variance and reliability of the construct
Component Label Items Explained Cronbach alpha
Factor Loadings Variance (%) (α)
Satisfaction Sat1 .863
Sat2 .843
Sat3 .690
Sat4 .680
Sat5 .658 24.6 .86
Alternative Attractiveness AA1 .860
AA2 .802
AA3 .788
AA4 .777 13.5 .87
Switching cost SC1 .786
SC2 .761
SC3 .698 11.3 .74
Multi-SIM MSM1 .882
MSM2 .860
MSM3 .752 8.8 .80
Service Quality Sq1 .789
Sq2 .758
Sq3 .668 5.5 .80
Note: extraction method: Principal Component Analysis; Rotation Method: Varimax with Kaiser
Normalization; Variance explained: 63.6%
4.2 Hypotheses Testing
The hypotheses stated were tested using multiple regression and logistic regression with the aid of
SPSS version 17. The multiple regression result shows that the multiple correlation coefficients
(R) using all the predictors simultaneously is .42 and adjusted R2 is 17%. This means 17 per cent
of the variance in porting intention was accounted for by the predictor variables. The F – statistics
from the ANOVA table shows a statistically significant relationship between porting intentions
and porting antecedents F(5, 324) = 13.52, p , 0.001; and verifies the research model goodness of
fit. Table 4.3 shows the regression coefficients of the constructs. Satisfaction (β = -0.14, p < .05)
and service quality (β = -0.21, p < .001) were found to be statistically significant with negative
regression coefficients suggesting that as customer satisfaction and provider’s service quality
decreases, customers’ intention to ‘port’ their mobile number increases. Thus, we found support
for H1 and H3. Alternative attractiveness was also found to be statistically significant with positive
regression coefficients (β = 0.21, p < .001). As expected, the stronger the attractiveness of
alternative provider, the stronger the customers’ intention to port their mobile number. Thus, H2b
was supported. We found a surprising result for the effect of switching cost. The regression
coefficient shows a positive and statistically significant relationship with porting intention (β =
0.12, p < .05), suggesting that as switching cost increases, customer porting intention increases. A
possible explanation for this effect could be that since mobile number portability is free, customers
may be willing to pay a price to ‘port’ their mobile number. As such may be willing to expend the
time and effort and go through the procedural hassles of porting. Thus, we found support for H2a.
However, the effect of multi-SIM was not statistical significant. Thus H4 was not supported. The
non-significant result could be due to the dominance of the use of a particular GSM provider in
our dataset. Furthermore, customers churn between operators when they use multiple-SIM. Thus,
multiple-SIM is used as an alternative to porting.
Table 4.3 Multiple regression results for hypotheses test
Unstandardized
Coefficients Standardized Coefficients
Model B Std. Error Beta T Sig.
(Constant) 3.059 .425 7.192 .000
Satisfaction -.160 .065 -.142 -2.45 .015
Alternative attractiveness .221 .056 .209 3.950 .000
Switching cost .127 .055 .119 2.303 .022
Multiple-SIM .038 .061 .032 .616 .538
Service quality -.289 .076 -.211 -3.80 .000
Note: R = .42, R2 = 17.3, F = 13.52 p < 0.001
a. Dependent Variable: Porting Intention
To test hypotheses 5, 6, 7, and 8, logistic regression is used to ascertain the effect of customers’
demographic on porting intention. Logistic regression is used to estimate the probability of porting
since our dependent variable is dichotomous with the values 0 = No, or 1 = yes, and demographic
variables of age, gender, education, and occupation as the independent variable.
Table 4.4 Logistic regression estimates
B S.E. Wald Sig. Exp (B)
Age
Gender .326 .243 1.800 .180 1.385
Education .024 .127 .036 .850 1.024
Occupation -.555 .178 9.706 .002 .574
Constant 2.504 .776 10.413 .001 12.229
Model X2 26.28 df 4 p < 0.001
H-L test X2 30.32 df 7 p < 0.001
a. Dependent Variable: Porting Intention
Table 4.4 shows the estimates for the logistic regression analyses. The result indicates that the
model is a good fit (X 2 = 26.28, df = 4, p < 0.001). The H-L Goodness of fit test also support our
model with a significant fit of (X2 = 30.32, df = 7, p < 0.001). From the result, we found support
for Hypotheses 5 and 8, suggesting that age and occupation influences porting intention: the
direction of the relationship indicates that younger subscribers show greater propensity to port
compared to older subscribers. In addition, occupation significantly influenced porting intention.
Though, the negative direction of the relationship suggests that those in the civil service and
students were more likely to port than self-employed. However, the effect of gender and education
was not significant. Thus, Hypotheses 6 and 7 was not supported.
5 Discussions
This study investigates factors influencing customer intentions to switch service provider in the
context of MNP. This study contributes to the literature by examining the effect of multiple-SIM
phenomenon amongst porting antecedents and customers’ occupation on switching intention in the
context of MNP in mobile telephony. In line with previous findings, our result provides support
for the antecedents of customer switching in the context of MNP. We found that customer
satisfaction, alternative attractiveness, switching cost and service quality are related to porting
intentions. The effect of switching barrier (switching cost and alternative attractiveness) on
customer switching intention confirms previous studies in the service switching literature (e.g.,
Bansal et al. 2004; Chuang, 2011; Shin & Kim, 2008). Our findings suggest that switching cost
and attractiveness of alternative positively influence porting intentions contrary to Shin and Kim
(2008) findings. The implication of these findings is that as competitors’ offerings becomes more
attractive to the customers, their intention to port increases. Paradoxically, our result suggests that
high switching cost may not necessarily prevent customers from porting when alternatives are
perceived as stronger. Moreover, the implementation of MNP is with the expectation it will reduce
switching barrier by lowering switching cost.
The significant effect of customer satisfaction and service quality is consistent with previous
studies such as Shin and Kim (2008), and Bansal et al. (2004). Additionally, service quality is a
major factor affecting porting intention. This implies that the quality of service, network quality
and call quality are factors subscribers’ consider important when porting. In a similar vein, when
satisfaction level drops, customers might adopt MNP. However, we found a non-significant effect
for multiple SIM on customers’ porting intentions. To the best of our knowledge, this is the first
study that first empirically examines this concept. Multiple SIM users switch between operators
to avail themselves of better deals. However, we had expected multiple SIM to negatively affect
porting, since subscribers’ who switch between operators may not consider porting especially for
‘non-number loyal’ subscribers (Iqbal, 2010). This implies that multiple SIM is an option to
porting. In other words, customers can either port or adopt different providers simultaneously.
Finally, among demographic variables, only age and occupation have significant effect on porting
intentions. Age exerts a significance influence on porting intentions with younger subscribers
about 0.29 times more likely to port than older subscribers when all other factors are constant. This
confirms previous findings by Nimako and Nyame (2015), Shin and Kim (2008), but contradicts
Park et al. (2007) study. The significant effect of occupation contradicts Park et al. (2007) findings
on the effect of respondent job. The non-significant effect of sex supports previous findings
(Nimako and Nyame 2015; Kolodinsky et al. 2004; Okeke et al. 2015). In other words, female
subscribers as well as their male counterpart may be willing to port. Also, level of education does
not have significant effect on porting intentions in our data set. This contradicts Shin and Kim
(2008) findings but supports Nimako and Nyame (2015).
6 Managerial and Policy Implications
An understanding of the predictors of porting intentions will afford telecom operators opportunity
to design strategies for customer acquisition and retention and also provide policy makers an
understanding of the necessary framework to implement in order to foster competition and improve
consumers’ welfare.
From the policy perspective, there is need to intensify awareness on MNP and the procedure for
porting. Such awareness need to be conducted periodically to register it into the consciousness of
subscribers. This is necessary to raise the level of consumer perception of the scheme. Additionally,
incentives should be offered to subscribers to encourage porting when necessary rather than the
use of multiple-SIM. Though MNP was principally implemented to improve consumer welfare,
one may argue that if subscribers’ benefit more from using multiple-SIM, then the aim of MNP
introducing may be defeated. However, the problem of improper accounting of SIM cards may
surge unnecessary as was experienced recently in the slamming of the dominant carrier in Nigeria.
Regulators may need to license the use of universal SIM cards that can allow subscribers to port
between network providers with short codes. This could be introduced in such a way that
subscribers’ are allowed to operate on a network of choice for a specified period and probably
charge subscribers that may which to terminate their contract before the expiration of the period.
Regulators may also consider licensing new entrants into the mobile telecommunication industry
to leverage on MNP scheme to capture a segment of the market. This may further enhance
competition and improve the quality of service.
From the managerial perspective, service quality has been found to be the major factor with direct
impact on porting intentions. Thus, GSM service providers need to improve the quality of their
service delivery. Efforts should be made to improve the call and network quality of mobile voice
services. This is necessary as GSM carriers that are perceived to have better service quality may
win more port-ins and retain existing customers. However, policy makers need to invest in critical
infrastructure such as power and security to enable service providers improve on the quality of
service. Furthermore, GSM service provider need to manage their subscribers’ satisfaction
effectively. Subscribers’ with unmet expectations might port their mobile numbers. GSM service
providers should consider realigning the competitive strategy by improving on their brand image
and offerings. They may also need to segment their market along socio-economic variables of age
and occupation for different customer groups in order to serve them more efficiently. Younger
subscribers’ should be targeted with incentives that could be perceived as more attractive than that
of competitor to encourage them to port.
7 Conclusion and Limitation
This study investigates antecedents of subscribers’ porting intention with focus on the effect of
multiple-SIM. Service quality and alternative attractiveness are strong predictors of porting
intentions. Additionally, switching cost has a reverse effect on switching intentions. While lower
level of satisfaction will increase porting intention. However, multiple SIM phenomena do not
impact directly on porting intention. This implies that subscribers’ churn between GSM providers
using two or more mobile networks rather than adopting MNP. Furthermore, subscribers’ are
mostly not aware of MNP or its procedure and have consequently shown disinterest in porting.
This questions the necessity of the scheme. This study is not without its limitations. First, analysis
from our dataset reflects the dominance of a particular GSM provider in the sample due to the
setting of the study. Future studies may consider sampling a cross section of subscribers to reflect
a spread of current market share of players in the industry to improve on the generalizability of the
result. Second, direct effects of porting antecedents were investigated. Future studies may consider
investigating the moderating effect of multiple-SIM on service quality, alternative attractiveness
and satisfaction. Finally, consumer income and service usage pattern may also impacts on
customer churn (Ahn et al. 2006). Future studies may consider investigating these variables in the
context of MNP.
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Confident in Africa’s Future

17TH INTERNATIONAL ACADEMY OF

GOVERNANCE AND BUSINESS POLICIES:

ISBN: 978-0-620-70935-4 www.iaabd.org

“The development of a country is brought about by people, not by money. Money,

To achieve their objectives and effectively discharge their responsibilities, African

Leadership for efficiency and effectiveness to ensure efficient use of entrusted

Management should incorporate stakeholder expectations into a broad business policy

Pantaleo M. D. Rwelamila, PhD Anita Spring, PhD

Pantaleo Rwelamila University of South Africa

Simon Sigue Athabasca University

Kofi Dadzie Georgia State University

Zelealem Yiheyis Clark Atlanta University

Raida Abuizam Purdue University Northwest, USA

Paolo Miranda Purdue University Northwest, USA

Emmanuel Cleeve Manchester Metropolitan University

Eileen Kwesiga Bryant University

Jennifer M. Sequeira The University of Southern Mississippi,

Richard A Owusu Linnaeus University, Kalmar, Sweden

Benny Berggren University of Gävle, Sweden

Desalegn Abraha University of Skövde, Sweden

Hawa Uiso Open University of Tanzania

Albertina Jere Cape Peninsula University of Technology,

Guiomar Martín-Herrán Universidad De Valladolid, Spain

Maxwell Ofori Nkrumah Tbwa\Markcom, Accra, Ghana

Cynthia A. Bulley Central University College, Accra,Ghana

Henry N. Ozuru University of Port Harcourt, Nigeria

Thérèse Roux Tshwane University of Technology, South

Mahama Braimah University of Ghana Business School, Accra

Bukaza Chachage Nelson Mandela African Institution of

Binganidzo Muchara University of South Africa

Jan Kruger University of South Africa

Hector Iweka Lasell College, USA

Chimba Deo Tennessee State University, USA

Simon Sigue Athabasca University, Canada

President Kofi Q. Dadzie Georgia State University, Atlanta, GA

Vice President Simon P. Sigué Athabasca University, Canada

Tidings P. Manchester Metropolitan University

Vice president Finance O. Felix Ayadi Texas Southern University, USA

Vice President Moses Acquaah University of North Carolina at

Vice President Judy Muthuri Nottingham University, UK

Program Chair Emmanuel Cleeve Manchester Metropolitan University, UK

Proceedings Co- Editor Pantaleo D. Graduate School of Business Leadership,

Proceedings Co- Editor Anita Spring University of Florida, USA

Accounting, Finance, and Investment .......................................................................................................... 12

Religiosity and Financial Decisions of Young Adult Nigerians: .................................................................................. 31

Is the Money Advice of Religious Leaders Sacrosanct? ................................................................................................. 31

International Aid, Economic Policies and Strategies ................................................................................... 47

Occupational Health Hazards: Reducing Environmental Health Effects Of Electrical/Electronic Equipment

Entrepreneurship, Small Business and the Informal Sector ....................................................................... 69

Sustainable Entrepreneurship: Positive Change Agents ................................................................................................ 91

at the Base of the Pyramid (BOP) ........................................................................................................................................ 91

The Impact on Livelihoods of the Income Earned ............................................................................................................ 94

by Women Hairstylists in Tanzania...................................................................................................................................... 94

Influences on the Start-up and Growth of Small and ..................................................................................................... 121

Medium Enterprises in Tanzania ........................................................................................................................................ 121

Indirect Business Formalisation: An Inclusive Approach ............................................................................................ 141

to Regulating the Second Economy .................................................................................................................................... 141

Charles Mbeye Limbert......................................................................................................................................................... 169

Human Resources, Management and Organization .................................................................................. 230

Lead: Leadership Effectiveness: Egypt’s Case ............................................................................................................... 232

Marketing and Consumer Behavior........................................................................................................... 286

A Literature Review ............................................................................................................................................................... 287

* p< 0.10 p< 0.05 * p < 0.01