A RESEARCH SUBMITTED TO DEPARTMENT OF MANAGEMENT

IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD

OF BACHELOR ART (BA) DEGREE IN MANAGEMENT

WACHEMO UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT

PREPARED BY: BANCHAYEHU ADBARU………….0064280

ADVISOR: PHILIPOS. (PHD)

July, 2013.EC

HOSSANA,ETHIOPIA
Declaration
I declare that this thesis work entitled “The Role of Micro and Small Enterprises in
Employment Creation and Income Generation a Survey Study Hossana town, southern
Region, Ethiopia.” is my original work, has not been presented earlier for award of any degree or
diploma to any other university and that all sources of materials used for the thesis have been duly
Acknowledged.
I have produced it independently except for the guidance and suggestion of my research advisors.
 WACHEMO UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF MANAGEMENT

Approval sheet
Advisor’s Approval: Name _______________signature___________Date_______

Title: FACTOR AFFECT THE EFFECTIVENESS OF MICRO AND SMALL

BUSINESS ENTERPRISE IN CHIRO TOWN ADMENSTRATION

BY: ABEBECH YENEW

Approval Committee

Name signature

-------------------------------------- --------------------------------------

Advisor

---------------------------------------- ---------------------------------------

Examiner

-------------------------------------- ----------------------------------------
ACKNOWLEDGEMENT
Above all, thanks to GOD for his priceless help during the entire period of my study, without his
would it cannot be true.

Next my greatest thank goes to my respectful advisor Mr.Philipos for his consult, guidance
advice and critical comments to the successful accomplishment of this study. And I would like to
thank all the staff of the Hossana town micro and small-scale enterprise for their helping during
data collection.

Finally, my mother deserves my gratitude thanks which were supporting morally and financially
during the entire of my study.
 ABSTRACT
The purpose of this study was to assess the factors that affect the effectiveness of micro and small
business enterprises in case of Hossana town. The objectives are to examine the factor that
influence the effectiveness of micro and small business enterprises in Hossana town, to examine
the effectiveness of micro and small business entrepreneurs and to identify the possible
mechanism to solve the identified problems. The target populations of this study would be 298
entrepreneurs of selected micro and small business enterprise of Hossana town. There three
entrepreneurial sectors in Hossana town micro and small business enterprise office. In this study
the researcher used descriptive research design. For this purpose, simple random sampling
technique would be l used. In this study, 67 entrepreneurs would be used. The data obtained
from the close-ended items of the questionnaires would be analyzed quantitatively by using table,
frequency count and percentage. The data from the open-ended items of the questionnaires, and
document will be analyzed through tabulation and statement form. As the researcher observed
the case area there are some factors which hinder and limit the development of entrepreneurs
like, economic which is concerned with assessing financial benefits of cost associated with the
entrepreneurs. Political which is the process of evaluating how key entrepreneurs and the
organizational attitude is the main which affect the effectiveness micro and small scale
enterprise in Hossana town? On the other way, the growth of entrepreneurship task are as less
as the attention given by the government and at the end of the study the conclusion and
recommendations was given for the problem identified.

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 ACRONYMS
MSE= micro and small-scale enterprise

SSE’s= small scale enterprises

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Table of content
Approval sheet..............................................................................................................................................i
ACKNOWLEDGEMENT............................................................................................................................i
ABSTRACT................................................................................................................................................ii
ACRONYMS.............................................................................................................................................iii
Table of content..........................................................................................................................................iv
List of tables...............................................................................................................................................vi
CHAPTER ONE..........................................................................................................................................1
1. Introduction.............................................................................................................................................1
1.1 Background of the Study.......................................................................................................................1
1.2 Statements of the Problem.....................................................................................................................2
1.3. Objective of the Study..........................................................................................................................3
1.3.1 General Objective of the Study...........................................................................................................3
1.3.2 Specific Objective...............................................................................................................................3
1.4. The Scope of the Study.........................................................................................................................3
1.5. Organization of the Paper.....................................................................................................................4
1.6. Significance of the Study......................................................................................................................4
1.7. Limitation of the Study.........................................................................................................................5
CHAPTER TWO.........................................................................................................................................6
2. Literature Review....................................................................................................................................6
2.1. Entrepreneur and Entrepreneurship......................................................................................................6
2.1.1. Types of Entrepreneurships...............................................................................................................7
2.1.2. Characteristics of Entrepreneur and Entrepreneurship.......................................................................8
2.1.3. Challenges of Entrepreneurs..............................................................................................................9
2.1.4. Role of Entrepreneurship in the Economy.......................................................................................10
2.1.5. Challenges of Entrepreneurs............................................................................................................11
2.2. Micro and Small Scale Enterprise.......................................................................................................12
2.2.1. Definition and classification of MSEs.............................................................................................12
2.2.2. The quality of employment in MSEs...............................................................................................13
2.2.3. Common Characteristic of MSEs....................................................................................................14

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2.3. Factor Affecting Performance............................................................................................................15
2.3.1. Change from present life style.........................................................................................................15
2.3.1.1. Work Environment.......................................................................................................................15
2.3.1.2. Disruptions...................................................................................................................................15
2.4.. Factors affecting to form new Enterprise...........................................................................................16
2.4.1. Desirability of Starting a new Business...........................................................................................16
2.4.2. Factors affecting possibility of Starting a new Business..................................................................16
CHAPTER THREE...................................................................................................................................17
3. Research Methodology..........................................................................................................................17
3.1.Study Area Description.......................................................................................................................17
3.2. Research Design.................................................................................................................................17
3.3. Source of Data and Method of Data Collection..................................................................................17
3.3.1. Target Population............................................................................................................................18
3.4 .Sampling Technique and Sample Size Determination........................................................................18
3.4.1 Sample Size......................................................................................................................................18
3.4 .2.Sampling Technique........................................................................................................................19
3.5. Data Collection Techniques................................................................................................................20
3.6 Method of Data analysis and Interpretation.........................................................................................21
CHAPTER FOUR.....................................................................................................................................22
4. Data Presentation and Analysis.............................................................................................................22
4.1 General Characteristics of Respondents...............................................................................................22
CHAPTER FIVE.......................................................................................................................................30
5. Summary, Findings Description area, Conclusions and Recommendations........................................30
5.1. Summary of findings..........................................................................................................................30
5.2 Discussion of Findings........................................................................................................................33
5.3. Conclusion..........................................................................................................................................34
5.4. Recommendations..............................................................................................................................36
Reference...................................................................................................................................................38
APPENDIX...............................................................................................................................................39

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List of tables
Table 4.1 back ground of respondent
Table 4.2. Mariage statuts
Table 4.3. Types of micro and small business
Table 4.4. Starting of business
Table 4.5. Initiation of start business
Table 4.6. Relation with customer
Table 4.7. System used to be successful competitors
Table 4.8 .Purpose of cooperation with fellow
Table 4.9. Initial capital to run the business
Table 4.10. Factor that hinder credit association
Table 4.11. Fairness of government tax
Table 4.12. Factors influence product modification

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 CHAPTER ONE

1. Introduction

1.1 Background of the Study

Developing micro and small scale enterprises play a significant role in improving the
deterioration of living standard of the people and the development gap of the country
with the other world (liedholm, 2001).

Micro and small enterprises are characterized by having greater inter and intra sect
linkages, uses local raw materials and labor intensive technologies, have potential for
competition, one that have a relatively small share of the market and is managed by its
owner or part owner in a personalized way and not through the medium of formalized
management structure(MUDCO,2013). It is independent in a sense that it doesn’t part of
a larger enterprise and that the owners/managers should be free from outside control in
taking their principal decisions.

In Ethiopia micro enterprises are defined as those business enterprise with a paid up
capital of not exceeding birr 20,000 and employ five (5) to nineteen (19) persons high
technical consultancy firms and other high technical establishments. Around the world
micro and small business enterprises are increasingly seen as the creators of new jobs.
The flexibility and dynamism of micro and small enterprises have made them more
competitive and adaptable than large firms, many of which have been forced to down size
and restructure. The benefits of business networks and commercial linkage between
micro and small enterprises are now recognized as effective and efficient means of doing
business as we enter new current (International labor office,2003).

But the development of micro and small scale interposes in Ethiopia is so slow that little
attention was given to the development of the sector in the previous governments. To
address this problem this study will be systematically assess the main constraints that are
pushing back micro and small enterprise from rapid expansion done to accelerate its
development and enhances economic development of the country in general and Hossana

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city in particular. . Despite these encouraging measures taken, the overall performance of
Micro and Small Scale Enterprise is not significantly increased.

1.2 Statements of the Problem

It true that micro and small business have vital part to play in the economy of country. A
small business owner is an individual who establish and manage for the principal purpose
of furthering personal good. Most small firm is unlikely to be able to exert much
influence on their market. They are price taker in classic sense and are likely to face
significant competition with flexible organization they are more sensitive and response to
market change (Burns and Hurt 1998).
The owner of small business should -gather information regarding product, market
condition as well as change take place in environment and act accordingly (Hodget as
2007).

The owner also understood his customer and treats politely and respectively. If the owner
has managerial and his business activities perform smoothly and leads profit if business
not lead to bankrupt.

As the researcher would be observe the case area there are some factors which hinder and
limit the development of entrepreneurs like, economic which is concerned with assessing
financial benefits of cost associated with the entrepreneurs. Political which is the process
of evaluating how key entrepreneurs and the organizational attitude the main which affect
the effectiveness micro and small scale enterprise in Hossana town. On the other way, the
growth of entrepreneurship task areas less as the attention given by the government.

2
1.3. Objective of the Study

1.3.1 General Objective of the Study

The general objective of the study will be to examine the factor that influences the
effectiveness of micro and small business in hosanna town.

1.3.2 Specific Objective

 To examine the major factors that influences the effectiveness of micro and small
business.
 To determine factor that influence each firm to make product modification.
 To investigate government imposed of tax on each micro and small business and
how affect their business activities.
 To assess the influence of capital on effectiveness of micro and small business
and the capital seeking power of each micro and small business.

1.4. The Scope of the Study

The scope of this research paper cover assessment of the factor that influence the
effectiveness of micro and small business in Hossana town such as managerial skill of
owners ,financial problem, high taxation system impose on small business and lack of
awareness of small business both product modification.

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1.5. Organization of the Paper
 This research contains five chapters with their main and sub topic and provides
detail information accordingly the study. .
 Chapter I:deals in detail on introduction, statement of the problem, objectives
of the study, limitations and significance of the study and the organization of the
research study.
 Chapter II: contains the review of related literature related to factors that affect
service quality and components of service quality.
 Chapter III :This chapter will describe the methodology and research design to
collect data for the research.
 Chapter IV: provides the details about the re and discussions from the analysis
of the collected data by the researcher.
 Chapter V:is the final part of the study, consists the conclusions and
recommendations based on the result and findings of the study.

1.6. Significance of the Study

The study was focused on the effectiveness of micro and small business. The outcome
of this useful for the owner of micro and small business in identified area. Generally the
study will be the following importance.

For the organization:-After conducting this research proposal the organization would be
beneficiary in that provide information concerned with factor that influence the
effectiveness of micro and small scale enterprises.

For the new researcher: - Other researchers can take this study as reference materials for
further study.

For the researcher: - The researcher is beneficiary on getting knowledge about the study
and experience on conducting such assessment and get satisfaction when the study wills
the solution for problem. Generally, my study have the following importance:-

 Helps to identify the major factors in providing service quality.

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  Helps to pick possible measure that should be radiate the poor service quality.

 Providing information to users about service quality.

 It is important to initiate employees in order to handle their customer.

 It is also helpful for further researcher who will conduct on the same or related
studies in the area.

1.7. Limitation of the Study

The researcher faced certain problems at the time of conducting the research. Some of
them are given below.
 The absence of recent literature in the research topic.
 Lack of cooperation from some respondents those who are concerned in given
information.
 It may be financial problems to pay necessary expenditure to conduct the
proposal.
 Limitation of time to collect data.
 Lack of experience of the researcher since it’s the first time when conducting
such type of study.
 Access to data: You will not always be able to go through all the resources. You
can’t gather all the data you want for...
 Lack of time. Often deadlines are the reason why your study and research might
not be complete.

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 CHAPTER TWO

2. Literature Review

2.1. Entrepreneur and Entrepreneurship

Entrepreneurship:-It is the capability and willingness to develop, organize and manage a
business venture along with any of its risk in order to make a profit. According to
economist, entrepreneurship combined with land, natural resources and capital can profit
and it characterized by innovation, risk taking and is an essential part of a nation ability
to succeed in an even changing and increasingly competitive global market place,
(Retrieved November 28).

The activity now a day from a job creation, the reason is that organizations cannot
accommodate to hire all graduates are expected to create their own jobs to become
entrepreneurs. Entrepreneurship is a dynamic process of creating incremental wealth.
This wealth is created by an individual who assumes the major risk in terms of quality,
time and career commitment of providing value for some product or service, (Hailey
2007).

Entrepreneurship can be defined in many ways, and four key elements found in most
definitions are vision, risk taking, organizing skill, and innovation. Entrepreneurial vision
encompasses the persistent quest for operational excellence innovation and being
responsible to the needs of the market. The innovation could be process innovation,
market innovation, product innovation, factor innovation, and even organizational
innovation. These four elements are interrelated and form continuous process in business,
(Petter1995).

Entrepreneurs:-Entrepreneur is one who detects and evaluate anew situation in his

environment and directs the making of such adjustment in the economic system as deems
necessary. An entrepreneur performs perceive opportunities for profitable investment,
explores the prospects of starting such manufacturing enterprise, obtaining necessary
industrial licenses, arranging initial capital, providing personal guarantees to the financial

6
institution, promises to meet the short falls in the capital and supplies technical things,
(Desai Vasant, 1997).

An entrepreneur is someone who exercises initiative by organizing a venture to take

benefits of an opportunity and, as the decision maker decides why, how and how much of
goods and services will be produced. An entrepreneur supplies risk capital as a risk taker
and controls the business activity. The entrepreneurs is also proprietor, a partner or the
one who owns the majority of shares in a corporate venture and it is not necessarily
motivated by profit, but it regard as a standards for measuring achievement or success,
(Retrieved November, ).

Entrepreneurs are action oriented highly motivated individual who take risks to achieve
goals and a people who has the ability to see and evaluate business opportunity, the
ability to gather the necessary to take advantage of them and ability to initiate appropriate
actions to ensure achievement of goal and they are instrumental to change,(Hailey,2003).

2.1.1. Types of Entrepreneurships

There are different types of entrepreneurships

Skeptical Entrepreneurship: -This type of entrepreneurship sees see success of others then
immediately starts to question it. It examines that person’s business they think that
successful entrepreneurs received may be it is the new or previous life experience, but
they are skeptical of success and do not believe it is possible without all the starts
following into place. When you cannot see or believe success is possible, you will never
get to a place in your mind that allows you to take action, (Retrieved, October).

Copycat Entrepreneurship: -These types of entrepreneurs see that the success of others
and then tries to copy them exactly. There is nothing wrong with modeling success it
actually very smart. There is a line however, between modeling and coping. Modeling
success means he or she see what works and figure out how to make it relevant to the
business, (Retrieved October 29).

Determined Entrepreneurship:-These types of entrepreneurship haven’t made it but they

will not matter that. They see the value in entrepreneurship, they see that success is

7
possible without copying and they do everything they can to start or grow their business,
(Retrieved November).

Private Entrepreneurship:-It is a type of entrepreneurship that is carried out by an

individual on the base of on property such as loan that is acquired and used on legal
ground, (DawitAyalew and DawitArega, 2005).

Collective Entrepreneurship:-It carried out by two or more entrepreneurs on the base of

collective property that is capital contributed by the entrepreneurs,
(DawitAyalewandDawitArega, 2005).

Technological Entrepreneurship:-It invents new technology to produce new products or

new process for producing new products, (DawitAyalew and DawitArega, 2005)

2.1.2. Characteristics of Entrepreneur and Entrepreneurship

Passion and motivation:-The one word that describes the basic requirement for an
entrepreneurship venture is passion. It is there something that you can work without
getting bored. It is there something that to enjoy the most and want to continue doing for
the rest of your life. The demonstration of passion and motivation will determine the
success in any entrepreneurial venture, (Shobhit Seth, 2014).

Risk Taking:-Entrepreneurs are risk takers ready to dive deep into a future of uncertainty.
But not all risk takers are successful entrepreneurs. Successful entrepreneurs are keep and
plan resource for dealing with unknown in future, (Shobhit Seth, 2014).

Self-belief and hard work:-Entrepreneurs are enjoying what they do. They believe in
themselves and are confident on what they do, (Shobhit Seth, 2014).

Adaptability and flexibility:-It is good to passionate or even knows about what to do. But
being inflexible about client or market needs will lead to failure. Entrepreneurial venture
is not simply about doing what you believe is good but also making successful business
out of it, (Shobhit Seth, 2014).

Money management:-It takes time to get to profitability for any entrepreneurial venture;
capital is limited and needs to be used wisely. Successful entrepreneurs realize this

8
mandatory money management requirement and plan for present and future financial
obligation. A Successful business man keeps a complete handle on cash flows, as it is the
most important aspects of any business, (ShobhitSeth, 2014).

Locus of Control:-Entrepreneurs have the degree to which a person believes to have

control over the outcome of an event determined by outsiders and internal locus of
control. Their action cause the outcome of event, (DawitArega and DawitAyalew, 2005).

Goal Oriented:-Entrepreneurs have relentless drive to accomplish goal they understand

what their priority are and continue to work hard towards those goals, (DawitArega and
DawitAyalew, 2005).

Emotional Stability:-Entrepreneurs have considerable amount of self-control and handle

business pleasure. They are comfortable in stress situations and are challenged rather than
discouraged by failure, (DawitArega and DawitAyalew, 2005).

2.1.3. Challenges of Entrepreneurs

Entrepreneurs face many challenges in today’s competitive business environment.
Fortunately, contemporary times also blessed entrepreneurs with more resources for
taking those problems that ever before. Cash flow management:-Cash flow is essential to
small business survival. Still many entrepreneurs struggle to pay the bill, while they are
waiting for cheeks to arrive in part of problem systems from delayed, (Tanya Roberson,
2004).

Time management:-It is the biggest challenge faced by entrepreneurs. If they only had
more times, to accomplish so much more activities, (Tanya Roberson, 2004).

Finance:-One of the biggest challenges for entrepreneurs is involving dealing with

finance. For new entrepreneurs it is often difficult to rise enough capital to start up their
companies even the business is established. Entrepreneurs have a hard time obtaining
loans and lines of credit,(Tanya Roberson, 2004).

Self-motivation:-While many peoples are used to having asset work schedule and routine
they must adhere to things are little difference with entrepreneurs, while self-employed,
(Tanya Roberson, 2004).
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2.1.4. Role of Entrepreneurship in the Economy
Entrepreneurship is catalyst that plays a crucial role in developing countries economy.
The following are some contribution entrepreneurship and entrepreneurs.

Create new job:-Path breaking offered by entrepreneurs, in the form of new goods and
services result in new employment, which can produce a good things for a business,
(Hailey, 2003).

Stimulating economic competition:-Many economists, beginning with Adam Smith

expounded the values inherent in economic competition. In competitive business
situation individuals are driven by self-interest to act in socially desirable manner.
Computation acts as the regulatory that forms their selfishness into service, (Hailey,
2003).

Providing goods and services efficiently:-Common sense tells us that the efficiency size
of a business varies with the industry that we can easily recognize. For example a big
business is better in manufacturing automobiles but entrepreneurs is in leading them,
(Hailey, 2003).

Increasing per capital income and output:-Entrepreneurial business activities result in

increasing income for entrepreneurs, employees and other related business output. The
supply of goods and services in the economy will also be increased. This increase
eventually leads to an increase in per capital income and output in the economy,
(DawitAyalew and DawitArega, 2005).

Improvement of business policies and procedures: -Entrepreneurs create a business that

involves new transaction which don’t in fit into the existing business regulatory system
and these requires the development of new business system, laws, rules and policies.
Such business investigates the revision of the existing business policies and procedures
and leads to the development f new ones which ultimately result better and good business
environment, (DawitAyalew and DawitArega, 2005).

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2.1.5. Challenges of Entrepreneurs
Entrepreneurs face many challenges in today’s competitive business environment.
Fortunately, contemporary times also blessed entrepreneurs with more resources for
taking those problems that ever before.

Cash flow management:-Cash flow is essential to small business survival. Still many
entrepreneurs struggle to pay the bill, while they are waiting for cheeks to arrive in part
of problem systems from delayed, (Tanya Roberson, 2004).

Time management:-It is the biggest challenge faced by entrepreneurs. If they only had
more times, to accomplish so much more activities, (Tanya Roberson, 2004).

Finance:-One of the biggest challenges for entrepreneurs is involving dealing with

finance. For new entrepreneurs it is often difficult to rise enough capital to start up their
companies even the business is established. Entrepreneurs have a hard time obtaining
loans and lines of credit,(Tanya Roberson, 2004).

Self-motivation:-While many peoples are used to having asset work schedule and routine
they must adhere to things are little difference with entrepreneurs, while self-employed,
(Tanya Roberson, 2004).

Entrepreneurs also face problems perhaps starting the day he or she identify the business
idea. The challenges faced by entrepreneurs can be as internal and external. External
problems are those that results from the factors that are beyond the direct control of
entrepreneurs. The internal factors are choosing of business idea, inexperience, lack of
skill, failing to plan, poor product quality and management problem, (DawitArega and
DawitAyalew, 2005).

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2.2. Micro and Small Scale Enterprise
The history of small business has been one of the most controversial stories in economic
development in the world. It is not known when MSEs start. The role of small business in an
economy has frequently been undermined and misinterpreted this is because that many
governments emphasize on the attraction and promotion of large enterprises by thinking that
most of the economic development or income comes from large industries.

2.2.1. Definition and classification of MSEs

What is stated or identified as micro and small enterprises in many industrialized countries
may differ in other developing countries. In developed countries, micro enterprises can be
labeled as small or medium in developing countries. This is because the amount of capital
invested and the number of people employed in operating and implementing MSEs and the
level of technology vary from one country to another. In some countries, MSEs labeled based
in the number of employees and others on capital invested.

The Central Statistical Authority (2002)of Ethiopian defined MSEs as household type
establishment activity, which are mainly engaged in marketed production, are not
registered companies or co-operatives, have no full written book of accounts, have less
than 10 persons engaged in the activities and have no license.

Micro and small-scale enterprises are defined in several countries within their different
purposes and intention. Thus, definitions depend on the government policies. There are
different MSEs, which have different technological advancement or know how, the
nature of the raw materials use and the market they have for their product. The different
classes of MSEs are different with their developmental advantages and with respect to
their impact of policy and policy change. Thus, it makes problematic to speak or define
MSEs in universally accepted way, (Drik 1994, cited in Ephrem, 2005).

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2.2.2. The quality of employment in MSEs
Employment growth in small enterprises does not necessarily reflect a successful
development strategy. It is also important to consider the quality of employment, which
can be broadly defined as the work-related factors that have an impact on the economic,
social and psychological well-being as well as on the health of the employed persons. On
average, jobs in small enterprises are less productive, less remunerated, less secure and
less unionized than jobs in larger enterprises, even after controlling for observable
workers characteristics, such as education, sex and age, (Reinecke, G. 2000).

For instance, the study by Soderborn (2001) estimates that in Ghana’s manufacturing
sector, a 10 percent rise in firm size is statistically associated with a 1.6 percent rise in
earnings. For these reasons, many people concerned with employment quality and
industrial relations view the growing emphasis on small enterprise employment as a
threat rather than an opportunity. Moreover, as mentioned above, some people find work
in small enterprises simply because they have no alternative. For these persons, it is a
kind of survival strategy that is adopted despite low and possibly declining returns until
something better comes along. As such, it is a reflection of economic failure rather than
success. These enterprises can be very important in helping a large number of very poor
people become a little less poor but they can generally not provide employment of high
quality. Most studies considering employment quality in small enterprises largely focus
on income levels (or profits for the enterprise owner in the case of very small
enterprises). Obviously, income is indeed a crucial dimension of employment quality,
especially in countries where many workers‟ incomes are insufficient to move the
household they live in beyond the poverty line. However, other dimensions of
employment quality, such as occupational health issues, job security and the degree of
social protection are also crucial for the well-being of the employed persons in small
enterprises and their household members. Employment quality is thus a multidimensional
concept. In many developing countries, an improvement in the labor market performance
may not directly be observed via decreasing rates of open unemployment or employment
creation.

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2.2.3. Common Characteristic of MSEs
There are assumptions that are common characteristics of MSEs. These common
characteristics are; they have few employees, give low income, not experience much
growth and do not produce for markets outside their local environment, (Eversole, 2003).

Employment Generation:-Available evidence suggests that micro enterprise do not show

growth in terms of number of people employed. While small firms experience both high
job creation and destruction rates, it appears that job destruction during recession is lower
in small enterprise than in large enterprises perhaps due to greater wage flexibility in
small firms. In contrast, large firms offer better in terms of wages, fringe benefits, and
good working conditions, opportunities for skill enhancement and job security,
(Snodgrass & Biggs, 1998).

Efficiency and Innovation in MSEs:-Efficiency and innovation is one of the determinants

in MSEs Survival. Sondgrass and Biggs (1998) stated that; there has been a substantial
difference detected in economic efficiency among enterprise of varying sizes. It is often
argue that small firms are more innovative, particularly when they follow “niche
strategies” using high product quality flexibility and responsiveness to customer needs as
a means of competing with large scale mass producers’’.
Measures of enterprise efficiency vary greatly both within and across industries. Those
that varies are labor productivities or total factor productivities. Among the total factor
productivities; financial market, imperfections such as information asymmetries,
transaction costs and contract enforcement costs are particularly affecting the poor who
lack collateral and credit histories not to work efficiently.
Income generation:-While there are many exceptions to the basic pattern, the evidence
suggests that larger employers offer better jobs in terms of wages, fringe benefits,
working conditions and opportunities for skills enhancements as well as job security. In
low-income countries, small enterprises have much lower productivity levels than larger
firms, which lead to lower wages and nonwage benefits. There is some evidence that this
divergence in labor productivity and wage rates between small and large firm’s narrows
as countries become more developed in terms of industrialization, (Snodgrass and Biggs,
1998).

14
2.3. Factor Affecting Performance
Many individual have difficulty in bringing their idea to the market and creating a new
venture. Yet entrepreneurship and the actual entrepreneurial decision have resulted in
several million new businesses throughout the world. Each of these companies is formed
through a very personal process. Although unique have some common characteristics.
Like all processes, it entails a movement from something to something. (a movement
from a present life style to forming a new enterprise). The decision to start an
entrepreneurial venture consists of several sequential sub decisions (Hisrich and peter,
1989:pp. 10-14)

- The decision to leave a present career

- The decision that an entrepreneurial venture desirable
- The decision that both external and internal factors make the venture possible

2.3.1. Change from present life style

The decision to leave a present career and life style is not an easy one. It takes a great deal of
energy to change and create something new. The two most important incentives to leave a present
life style and start a business are work environment and disruption

2.3.1.1. Work Environment

While individual tend to start business in familiar area to work environments tend to be
particularly good in spawning new enterprise: research and development and marketing. Working
in technology. / Research and development) individual develop new product, ideas and processes
and often leave to form new companies when the present employers do not accept the new ideas.
Similarly, individuals in marketing become familiar with the market and unfilled customers’ want
and needs and frequently start new enterprise to fill these needs.

2.3.1.2. Disruptions
Perhaps even more incentive to leave a present life style and overcome the inertia by creating
something new comes from a negative force (disruption). A significant number of companies are
formed by people who have retired, who are relocated, or who have been fired. There is no
greater force than person dislocation to galvanize a person in to action another cause of disruption
and resulting company formation in the complementation of an education degree

15
2.4.. Factors affecting to form new Enterprise
Yet what causes change due to personal disruption result in new company being formed instead
of something else. The decision to start a new company occurs when an individual perceives that
it is both desirable and possible.

2.4.1. Desirability of Starting a new Business

The desirability of starting a new business is resulting from an individual’s culture, sub culture,
family, Teachers and Peers

2.4.2. Factors affecting possibility of Starting a new Business

While the desire generated from the individuals’ culture, sub culture, family, and teachers and
must be present before any action is taken, the second part of the question centers on the
question: what makes it possible to form a new company? Several factors- government,
background, marketing, role models and finance, contributes to the creation of new venture.

16
 CHAPTER THREE

3. Research Methodology

3.1.Study Area Description

The Study area description of this study would be all entrepreneurs of selected micro and
small-scale enterprise of Hossana town. There are three entrepreneurial sectors in
Hossana town micro and small-scale enterprise office. These are service, manufacturing,
and trade with a total population of 102, 54, and 142 respectively. The total population is
298. So the researcher would be use 298 as target population together and assess
information regards to the challenge of entrepreneurs.

3.2. Research Design

In this study, descriptive type of research design based on survey will be employed. The
reason for selecting descriptive type of research design is that it is clear that the
researcher was simply describe the available data which already exist and also the study
will be describe characteristics of particular events.

3.3. Source of Data and Method of Data Collection.

To address the basic research questions, to acquire real source of data in the process of
the study was unquestionable. To have thick and valuable data, both primary and
secondary sources of data would be used for this study.

The primary data will be collect from entrepreneurs in Hossana city by structured
questioners. Both open-ended and close-ended questioners would be distributed to
entrepreneurs. Secondary data obtained from documents. In this regard, assess the
documents related to the area of the study. These documents include government policies,
reports, strategies, published and unpublished books, and other important material.

17
3.3.1. Target Population
The target population of this study would be all entrepreneurs of selected micro and
small-scale enterprise of Hossana town. There are three entrepreneurial sectors in Hossan
town micro and small-scale enterprise office. These are service, manufacturing, and trade
with a total population of 102, 54, and 142 respectively. The total population is 298. So
the researcher would be use 298 as target population together and assess information
regards to the challenge of entrepreneurs.

3.4 .Sampling Technique and Sample Size Determination

3.4.1 Sample Size

In this study would be use stratified sampling technique to categorize the target
population in to different sartorial group and would be select respondents by using simple
random sampling technique from each stratum. Questionnaires would be distributed for
selected respondents. The reason for selecting stratified sampling technique was that
homogeneous population, it is simple to categorize in to different groups, and it is
systematic error free and reduce bias. Sample size refers to the number of sample unites
selected from investigation. To determine the sample size Ronald Miweiers states that
"because of the tremendous of time and money required for a complete census of large
population a sample can actually be more accurate than a census in conducting real world
study".

18
3.4 .2.Sampling Technique

When sample used there also sampling error, which occurs because of using sample.
This sampling error can decrease by taking large number of sample size depending on
this assumption the researcher would estimate 10.8% of sampling error at the time of
sampling and used the following formulas to calculate sample size. The total population
of the study is 298. So Wolfer (2007).

N
Sample size (n) ¿ 1+ N (e)2

Where N = Population size

e =Sampling error

298
Sample size (n) ¿ 1+ 298(10.8 %)2

n = 67

The populations were divided in to four strata depending on their sartorial activities. The
sample size from all strata is 67. The population would be 102 of service, 54 of
manufacturing, and 142 of trade. To take sample from each stratum the researcher was
use stratified sampling technique based on sample size that is 67 (16.84%) and selected
from each stratum as follows.

102 people
Service (n) ¿ 298 people x 67 = 23 Sample

54 people
Manufacturing (n) ¿ 298 people x 67 = 12 Sample

142 people
Trade (n) ¿ 298 people x 67 = 32 Sample

Total = 23+12+32=67 Sample size would be select from the total population, (Ronald
Miweiers, business statics, 2002).

19
3.5. Data Collection Techniques
l

1. Interview
An interview is meant to record and analyses people’s opinions, experiences, beliefs and
ideas on relevant topics. The respondents are required to present more detailed
information. This gives a deeper insight into the social phenomena, as compared to the
quantitative methods such as surveys and questionnaires.

2. Focus Groups

A focus group refers to a group of people who have been purposefully assembled at
palace to take part in a discussion on a topic of relevance. It is a method of
collecting information by studying people’s collective views, opinions, experiences
and reactions. The participants of a focus group are chosen keeping in view certain
common characteristics that relate them to the topic of discussion.

3. Observation

Observation is defined as “the systematic description of events, behaviors, and art

effects in the social setting chosen for study. Through the mode of observation, the
researcher gets to describe situations as they exist, by making use of five senses, thus
presenting a sketch of a situation under study The researcher observes the behavior
of participants and records the results of these observations. Observation method is
roped in by the researcher to develop an overall understanding of the phenomena
being investigated, in the most objective accurate way possible .

20
3.6 Method of Data analysis and Interpretation

To analyze the data obtained from primary and secondary sources, the researcher used
different data analyzing techniques. The technique would be based on the nature of the
collected data and the research questionnaires. The data obtained from the close-ended
items of the questionnaires analyzed quantitatively by using frequency count and
percentage. The data from the open-ended items of the questionnaires, and document
analyzed through tabulation and statement form.

The counting and placing of data in particular group and sub group have been
done through simple and cross tabulation. Descriptive statistical tools were used to
analyze data. Descriptive statistical tools such as tables, percentages, are used. Mean,
maximum, minimum were used to classify the respondents annual income and
number of employees per MSEs in to the above mean, below the mean, the
minimum and the maximum.

21
 CHAPTER FOUR

4. Data Presentation and Analysis

This chapter deals with the presentation and analysis of the collected data. The data was
collected regarding to examine the factor that influences the effectiveness of micro and
small business in Hossana town. As indicated in the first chapter this research data were
collected using questionnaire with concerned employees. A total of 67 questionnaires
were distributed to the total employees of the organization. From these 67 questionnaires
60 were collected and the analyses of the distributed and returned questionnaire are
depicted below.
The data gathered through questionnaires are analysis methods which have tabular
representations for each of the close ended questions with their respective percentage
value and brief explanation for the open ended questions.

4.1 General Characteristics of Respondents

This section presents and interprets the general respondents of questionnaires by sex, age,
work experience and educational background, income per month. The questionnaire was
prepared in a way that can help to collect the required information, identification and
classification.

22
Table 4.1 back ground of respondent

Description Number in % Percentage

proportion
Sex Female 20 33.3

Male 40 66.7

Total 60 100

18-27 24 40
Age
28-36 12 20

37-45 20 33.3

46-54 4 6.7

Above54 0 0

Total 60 100

Educational Diploma 33 55
background
First degree 21 35

Second degree 6 10

Total 60 100

Source: own survey, 2021

The data gathered shows that the 60 respondents of these questionnaires 20 of them are
females while the 40 of them are males and it refers that most of the employees of
Hossana town micro and small scale enterprises are male and their percentage proportion
shows that 33.3% of targeted employees are females while 66.7% of them are males. As
it is shown in the table above table most of the respondents are in the age level of adult
period 40% of the respondents are in the between the age level of 18-27 and they are 24
in number 12 of them are in the age level of 28-36 and they are number 33.3% of the
respondents are in between the age level of 37-45 with their total number of 20 from
60 .And the rest 6.7% of the respondents were in the age level of 45-54 with convenient
number of 4.This data shows that above half of the respondents are above the age of
27.Among the respondents as the data shows respondent whose age is equals and above

23
55 is zero. The educational back ground of the respondent is characterized by the zero
amount of certificate holders which holders which the distribution started with diploma
holders proportionally they cover 55% of among 60 of the respondent.35% of the
respondents have first degree. And the rest 10% of the employees who are 10 in number
have a master degree.

Table 4.2. Mariage statuts

Marital status Respondent

No Percent

Married 20 33.3

Unmarried 30 50

Divorced 10 16.7

Widowed - -

Total 60 100

Source: own survey, 2021

Marriage is another element of demographic characteristics variable which we can use to

describe small business number in the town.

As indicated in the above table 20 (33.3%) of owners of micro and small business in the
town is married, 30(50%) of them were unmarried, and 10 (16.7%) of them where
divorced.

24
Table 4.3. Types of micro and small business

Small business Respondent

No Percent

Manufacturing 12 20

Service 23 38.3

Trade 25 41.7

Total 60 100

Source: own survey, 2021

There are several micro and small business activities in Hossana town. Among these
three types of micro and small business sectors were selected. As indicated on the above
table 12(20%) of micro and small business in the city were manufacturing, 23(38.8%) are
service sectors and 25(41.7%) were trade. According to the table, micro and small
business in the city is dominated by trade.

Table 4.4. Starting of business

Start of business Respondent

No Percent

Less than one year 8 13.3

Between one and two years 12 20

Three and above three years 40 66.7

Total 60 100

Source: own survey, 2021

The starting of micro and small business activities in Hossan town were not so far long as
giving employment opportunity for the lively hood of the town. As indicated on the
above table 8 (13.3%) of owners of micro and small business in the town start performing

25
the activity less than years, 12(20% )were start between 1 and 2 years, and 40(66.7%)
were 3 and above three years. We can understand from this table most of micro and small
business owner has 3 and above three years’ experience.

Table 4.5. Initiation of start business

What are your initiation to start the Respondent

business
No Percent

Willing to earn profit 33 55

Desire for creating job 27 45

Total 67 100

Source: own survey, 2021

There are several reasons that indicate people to start business in their life. Among to
earn profit and desire for creating job is the major one. From the table 33 (55%) of
respondent were willingness to earn profit and 27(45%) of respondent were desire for
creating job.

Table 4.6. Relation with customer

Have you good relationship with customer Respondent

No Percent

Yes 60 100

No 0 0

Source: own survey, 2021

As indicated in above table, all respondent have good relation with customers.

26
Table 4.7. System used to be successful competitors

What system you use to be successful Respondent

competitors in the market?
No Percent

Produce high quality product 36 60

Treat customer in good manner in selling 17 28.3

and buying

Sale at low price 7 11.7

Total 60 100

Source: own survey, 2021

Becoming successful in market is one characteristics of good market on the table 36

(60% )of them were use system of produce high quality of product, 17(28.3% )were use
system of treat customer in good manner in selling and buying, and 7(11.7%) were used
system of sale at low price to be successful in the market.

Table 4.8 .Purpose of cooperation with fellow

For what purpose you cooperate? Respondent

No Percent

For exchange experience 33 55

For borrowing birr for each other 27 45

Total 60 100

Source: own survey, 2021

As indicated in the above table the purpose of cooperation of owners of micro and small
business with their fellow sales person, 33(55%) of respondent for experience exchange
and 27(45%) were for borrowing birr for each other.

27
Table 4.9. Initial capital to run the business

What is your initial capital to run the

business?
No Percent

5000-10000 22 36.7

10000-20000 14 23.3

20000-30000 20 33.3

Above 30000 4 6.7

Total 60 100

Source: own survey, 2021

As indicated in the above table, 22(36.7%) of respondent were have initial capital of
between 5000-10000, 14(23.7%) of them were have initial capital between 10000-20000,
20(33.3%) of them were have initial capital between 20000-30000, and 4(6.7%) of them
have initial capital above 30000.

Table 4.10. Factor that hinder credit association

Why do you borrowed from credit Respondent

association?
No Percent

High interest rate 35 58.3

No credit association around 25 41.7

Total 60 100

Source: own survey, 2021

There are many factors hindering borrowing from credit association. As indicated in
above table 35(58.3%) respondent were put the reason was high interest rate, 25(41.7%)
of them respond the lack of credit association around them.

28
Table 4.11. Fairness of government tax

Is tax imposed by government is fair? Respondent

No Percent

Yes 24 40

No 36 60

Source: own survey, 2021

As indicated in the above table most micro and small business owners respond
unfairness of the government tax.

Table 4.12. Factors influence product modification

What factors influence you to make product Respondent

modification?
No Percent

Climate condition 10 16.7

Low level of education 20 33.3

Use habit about the product 30 50

Total 60 100

Source: own survey, 2021

As indicated in the above table, 10(16.7%) of respondent were respond for factor
influence the product modification the climate condition, 20(33.3%) of them respond low
level of education, and 30(50%) of them respond, use habit about the product.

Generally we can understand from the table the factors that most influence the product
modification was use habit about the product.

29
 CHAPTER FIVE

5. Summary, Findings Description area, Conclusions and

Recommendations
This chapter summarizes the main findings of the study and forwarded recommendation
based on the conclusions.

5.1. Summary of findings

This part revealed the major findings from the study on factor that affect the effectiveness
of micro and small business enterprises in case of Hossana town. To conduct this
research unstructured questionnaires, primary and secondary data were used. The survey
indicates that male participation is far better than females. Most of the owners of this
enterprises were completed their primary and secondary education.

The number of these enterprises is increasing from time to time. This is particularly
because of the prospect of the sector and the attention given for the growth and
development of these enterprises by the government.

Owners of the enterprises started their business with the intention of desire to work for
one self, desire to accumulate wealth, to earn for survival. In addition to the above
reasons 32% of the respondent’s reasons out it, the future prospect of this sector initiates
them to start.

The finding indicates that there is a lot of problem about entrepreneur to mention them,
lack of management skill, financial problem, Lack of manufacturing skill, myth results
from lack of research on entrepreneurship.

The study shows that the type, quality and design of products, services and
manufacturing of this enterprises does not satisfy the needs of consumers the reasons for
this were provided by the owner.

The study revealed that the government was provided and support micro and SSE’s
through organizing, training, Technology and integration. But these supports are not
sufficient so it has strategic plan for future supports.

30
This sub sectors faces different problems almost similar to the country side at the time of
establishment up to conducting and achieving the objective of the business.

Among this problem; absence of market, shortage and backwardness of materials for
production, skill, training, inputs, finance, competition in free market and information are
the majors. So that the government and other concerned bodies has to have a plan to
alleviate and reduce this problem for the development of micro and SSE’s in the town.

The data obtained from the close-ended items of the questionnaires would be analyzed
quantitatively by using table, frequency count and percentage. The data from the open-
ended items of the questionnaires, and document will be analyzed through tabulation and
statement form. As the researcher observed the case area there are some factors which
hinder and limit the development of entrepreneurs like, economic which is concerned
with assessing financial benefits of cost associated with the entrepreneurs. Since most of
the respondents were business people, most of the time they were busy serving customers
and this meant that a lot of time was used in data collection since the researcher had to
wait till all the customers had been served. This however only applied to those enterprises
that had the owner as the person attending to the customers. Language is a great barrier to
good communication; some respondents were conversant with English language used in
the questionnaire while others were not. For those who could not understand English,
interpretation into Kiswahili was done .Harsh climatic conditions and poor roads in the
area hindered accessibility.

31
Possible Limitations of the Researcher
The study covers manufacturing industry, service and construction sectors of MSEs in
Hossana town. The other types of sectors, other than the three sectors mentioned above,
are beyond the scope of the study because of time and finance constraints. Secondly, in
some of the enterprises the owners (managers) was not found. In this case data was
collected through the acting managers and finance heads. Next respondents also show a
tendency of underestimating their income and capital; this is because they fear tax and
other related problems. Finally, although data are lacking on micro and small enterprises
in Hossana, this did not affect the result of the research.

 Access -- if your study depends on having access to people, organizations, or

documents and, for whatever reason, access is denied or otherwise limited, the
reasons for this need to be described.
 Longitudinal effects -- unlike your professor, who can literally devote years even a
lifetime to studying a single research problem, the time available to investigate a
research problem and to measure change or stability within a sample is constrained
by the due date of your assignment. Be sure to choose a topic that does not require
an excessive amount of time to complete the literature review, apply the
methodology, and gather and interpret the results.
 Cultural and other type of bias -- we all have biases, whether we are conscience of
them or not. Bias is when a person, place, or thing is viewed or shown in a
consistently inaccurate way. It is usually negative, though one can have a positive
bias as well. When proof-reading your paper, be especially critical in reviewing
how you have stated a problem, selected the data to be studied, what may have been
omitted, the manner in which you have ordered events, people, or places and how
you have chosen to represent a person, place, or thing, to name a phenomenon, or to
use possible words with a positive or negative connotation.

32
5.2 Discussion of Findings
Discussion of Findings On the influence of education and training on the performance of
SMEs, the study established that majority of the respondents had achieved secondary level as
their highest level of education. These findings are consistent with those of Anderson (1993) who
argued that many SMEs owners or managers lack business training and experience. They develop
their own approach to management, through a process of trial and error King and McGrath (2002)
adds to this by arguing that majority of those who run SMEs are ordinary lot whose educational
background is lacking hence may not well equip to carry out managerial routines for their
enterprises. This could explain the reason as to why some few entrepreneurs sponsored their
training to acquire the necessary skills to manage their businesses. Another majority had not
attended any form of training on business management majority of the respondents had attended
training on business management in areas like keep records, business management, running a
business, customer service, sourcing of goods and human resource management. Some
entrepreneurs sponsored their own training while others relied on donations. The knowledge
acquired in the training helped SMEs by Improving their record keeping, improving level of
accountability, improving the relationship with customers, enabling them access loans, enabling
them manage the business better and enabling them to relate well with suppliers.

This training is relevant because as Wanjohi and Mugure (2008) argued, most of those running
SMEs in this sector have at least attained college level education. Education and training skills
also affected the performance of SMEs to a great extent. On the relationship between peer
pressure and the performance of SMEs, the study established that the respondents had been
influenced by their friends and age mates to start businesses. Majority of the respondents also
indicated that peer influence greatly improved business performance. The respondents shared
their experiences with their friend as regards what information and business experience and tricks
that could be shared.

On the influence of innovativeness and SMEs growth and development, the respondents indicated
that availability of ready market and lack of employment is what influenced them to start the
business. These findings are consistent with those of Foley &Green (1989) who argued that lack
of information and knowledge also causes lack of innovativeness in SMES. Majority of the
respondents indicated that they used technology in production, in purchase, in distribution, in
payment and in other area of the business. The findings show that the entrepreneurs used
information technology in their different operations.

Hallberg (1999) argued that the adoption of technology improves business performance. On the
registration process and policies and SMEs growth, the study established that majority of the
entrepreneurs had registered their business although quite a number had not. The entrepreneurs
acknowledged that regulations challenges influenced their registration process including other
mandatory requirements to operate their businesses. On the physical infrastructure, the
respondents indicated that physical infrastructure had no influence over the business enterprise.
Physical infrastructure affected the business enterprise to a small extent.

33
5.3. Conclusion
The researcher finally comes with the following conclusions based on the findings
regarding on factor that affect the effectiveness of micro and small business enterprises in
case of Hossana town.

The study has assessed the factor that affect the effectiveness of micro and small
business.

The participation of males are greater on the micro and small business compared
to females.
Most of the owners in SSE’s were under grade 12 educational level, between 25 –
40 years old.
The samples SSE’s was recently founded increased 2001 onwards which shows
the establishment of the SSE’s is increasing in every year.
Financial problem, lack of awareness about the importance of SSE’s lack of
ability and knowhow how to run this business,
Absences of analysis were some of the problem of the SSE’s owner to start new
business.
Nearly half of the sample SSE’s was managed by the single one individuals.
Even though the number of the enterprise is in a growing trend, above half of the
owner of the enterprise mentioned as there is still problems in satisfying consumer
needs and wants, inconsistent production capacity of the enterprise, wrong
perception of consumers to locally produced products were the major problems
failed to satisfy consumer wants.
More than half of the owners assured as they were not get support from
governmental bodies at sufficient level.
Most of the owners of SSE’s has the intention to recruit new workers
About more than half of the SSE’s employees were gaining payment for survival
from their enterprise.
Family running business was the reason for most of the SSE’s owner to choose
this business he/she runs.
Most of the sample micro and small scale enterprise had the willingness to open
(run) new business

34
Customer and existing business was the main source of new ideas to establish the
new business for most of the sample of micro and small business owners.
Own saving, loan from bank, family and sales of asset was the main to less source
of capital to the sample of micro and small business owner.
Majority of the sample of micro and small business owners has business
experience before starting this business.
The employees mentioned that experience exchange, ability and skill were some
of the advantage they gate in micro and small business they blamed as there is
absence of financial rewards in micro and small business they are working and
they added that as there is unexploited entrepreneurial potential.
As per the response from trade, service, and manufacturing. on the supports and
service the majority it is on organizing, training, technology and market
integration.

35
5.4. Recommendations
Based on the problem identified from the sample respondents of micro and small
business owners, the following recommendation suggested to improving the efficiency of
the research process.

Since most of the owners were under 12 grade it will constraint to go far on the
creativity process, so it is better to upgrade their educational level, and
participating on training which is given for awareness creation of the micro and
small business operation.
Even if the newly opened micro and small business is increasing from time to
time there was problems on the owner to start the new business which is basically
financial problem, so the owner has to look alternative source of income and the
government too should support them to be competitive and creative in their
business activity.
Those micro and small business which are manage by a single manager is better
to consult and share with other on the decision regarding the business activity.

If the above listed supports are provided in sufficient manner the capacity of the
entrepreneurs can improve and by that they can play a great role and contribution for
entrepreneurship activity and reduction of unemployment in the town. By that it is
possible to increase the overall economic contribution of entrepreneurial activity in
the town.

The other problem is non – productivity of this enterprises to satisfy the need and
wants of consumers. Most consumers are not satisfied by the type /quality/ design of
products /services/trade of micro and Small business in the town, failure of these
enterprises to be competitive in identifying better products when compared to
exported products and difficulty in identifying the needs of consumers and other
problem are existed in addition to this products /services/trade those needed by
consumers some time not available so to solve the problem the following measures
are recommended as a solution.

36
 Small – scale enterprises especially in small – industry areas should adopt, search
and use different technologies those helps to be productive.
Owners of this enterprises should seek information from clients, suppliers or
competitors and do research how to provide product /service merchandize with
best quality /type/ design.
They should determine the need and want/ demand of consumers and potential
customers to deliver products and services effectively and efficiently.

They should strive to keep consumers satisfied and place long – term good will and short
– term gain.

The government should encourage the coordination of government institutions, chamber

of trade and industry, micro and small enterprises agency and other NGO’s for supporting
this enterprise and on alleviating problems encounter them like absence of market, and
shortage and backwardness of materials for production skill, training, input, finance and
information are the majors.

In general if the factor that hinder the growth and development of small – scale
enterprises mentioned above and pointed by the owners and government were solved
these enterprises can play a greater role and can have attractive future in reduction of
unemployment and the like problem of the town.

37
 Reference
 Central Statistical Authority. 2002. Survey on cottage handicraft manufacturing
Industries report. Addis Ababa.
 Chaston Tran, 2000.Entrepreneurial marketing, competing by challenging
conventions, MacMillan.
 DawitArega and DawitAyalew, 2005. Entrepreneurs, a challenging expedition to
success.
 Desai Vasant, 1997. Dynamics of entrepreneurial development and management,
3rded.
 Ephrem .2005. business activity. 4th edition.
 En. Wikpidea .org //definition of entrepreneurship.
 Eversole, R. 2003. My business pays me: laborers and entrepreneurs among the self
employed.USA.
 Francis chigunta, 2000. Entrepreneurship, meeting the key policy challenge, wolf son
college oxford university, England.
 the published enterprise A.A.
 Http: en. Wikipidiea.org/wik entrepreneur and entrepreneurship.
 Hisrich and peter. 1989: modern business. 4th ed. Pp .10-14.
 International labor office,2003.
 Liedholm, 2001. Entrepreneurial development. (winter.2001). New York.
 MUDCO, 2013. Modern entrepreneurship activity. 3rd edition.
 Reinbeck, G.2000. Inside the Model. Politics, Enterprise Strategies and Employment
 Reincke, k. 2000. Entrepreneurship and the world. 6th ed. America.
 Retrieved, October. Important entrepreneurial action. India.
 Snodgrass &Biggs, 1998. Business and business owners.
 Soderborn. 2001. Small scale entreprise development. China.
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38
 Aregash, A. (2005). Public Private Partnership Projects of the GTZ in Ethiopia:
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APPENDIX

WACHWMO UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT

The general purpose of this questionnaire is to conduct a research on the factor affecting
the effectiveness of micro and small scale enterprise in Hossana town. Your responses are
very much important for the success of the study and you are expected to be confidential,
you are kindly requested to fill the questionnaire

Instruction:

You do not need to writer your name and address, only write the necessary information in
the space provided and put an (X) mark in the box.

Thank you for your cooperation!!

Part I: Personal information

1. Sex
 Male  Female

2. Age
18-25 26-40 41-60 above 45

3. Educational level?
1-6 7-8 9-12>12

39
Part II: the main questioners of the study

1. Type of business you are running

Manufacturing 
Service 
Trade 
2. What is the life of your business after start?
---------------------------------------------------------------------------------------------------
-------------------------------------------------
3. What was your intention for starting the business? (more than one answer is
possible)
Desire to work for oneself  Desire to accumulate wealth
To earn for survival  an opportunity presented it self 

Others Mention
_____________________________________________________________________
________________________________________________________________
4. What is the problem you face to start the business?
Financial problem for conducting
Lack of ability and skill
Lack of persons that can do the analysis
Lack of awareness about its importance 
Other mention
____________________________________________________________
5. What is the form of your business?
Solely by one individual 

40
 By one individual having consultation from other 
By two or more individuals 
6. Do the type quality and design of your products /manufacturing/ service get
improved from time to time?
Yes  No
7. If you yes for the above question, how?
_____________________________________________________________________
____________________________________________________________
8. Do the type, quality, design of your product/ Manufacturing /service is satisfying
the customers need?
Yes  No
9. If you say no for the above question, what do you comment the dissatisfaction of
customers?
_________________________________________________________________
10. Do you get any advantage from governmental bodies? (More than one answer is
possible)
By creating opportunity to promote your product and service
By creating opportunity to be competitive in the market 
By facilitating you to participate in innovative activities 
Other, mention
_____________________________________________________________________
____________________________________________________________
11. If you respond No for the above question what kind of support you need from
government bodies? ________________________________________________
________________________________________________________________
12. Do you have an intention to employee workers in your business?
Yes No

13. What was the major source of your capital

Own saving  Sale of asset 
Loan from bank  Inheritance Others 
14. Did you have any business experience before starting this business?

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 Yes No
15. Why did you choose this particular activity?
I could not choose any other  Due to lack of money 
It was family run business the other are highly competitive 
Relevant prior work experiences 
16. What are the type of tax you pay for the government?

17. Is the taxation system is fair

Yes 
No

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