Factors Influencing the Performance of SMEs in Kenya: A Case of Independent Petroleum Dealers in Nairobi

A Research Project Submitted to the Chandaria School of Business in Partial Fulfillment of the Requirement of the Degree of Masters in Business Administration (MBA)The purpose of this study was to determine the factors influencing the performance of SMEs in Kenya: A case of independent petroleum dealers in Nairobi. This study sought to establish how capital and resources, marketing and management skills impact the performance of Small and Medium Enterprises (SMEs). The research design adopted in this study was a descriptive study. The population of interest consisted of 74 independent petroleum dealers in the Nairobi area. The study had a sample of 50. Primary data was collected through the use of structured questionnaires which were hand delivered to the respondents. The study used primary data which was collected through the use of questionnaires. To analyze the quantitative data, frequency distribution and cross tabulations were used. The data analysis tool used was the Statistical Package for Social Sciences (SPSS). The major findings revealed that indeed the key variables used namely capital and resources, marketing and management skills impact the performance of SMEs as proven by the result of the study. The study revealed that capital and resources are indeed the lifeline of the firm with entrepreneurs attaching a lot of emphasis on the availability of capital and resources. However, the findings also acknowledged that it becoming much easier for SMEs to acquire capital resources mainly financial from financial institutions such as banks although most preferred to use retained earnings. On marketing, majority of the respondents stated that they took marketing activities seriously especially pertaining to product range, pricing, and location . In most cases competitive advantage was based on ambience of the premises, the quality of the products and customer service. Thus SMEs owner-managers recognized that building relationships were vital to a company’s success and they invested considerable time and effort in maintaining good relations with regular clients of customer retention and growth. Another major finding is that the skills of the management had a positive impact on the employee motivation, resulting in enhanced service quality thus tricking over to improved sales and business growth. Owners of the stations do place a lot of emphasis on acquiring managerial skills and they do consider managerial aptitude as the key to their enhanced performance. The research found that enterprises require managerial skills capable of positioning businesses efficiently within a complex business environment. The major conclusions of the study point out that those firms which were marketing orientated, or competent practitioners of marketing, performed better in terms of return-on-investment (ROI) and market share. The results revealed that these independent petroleum dealers have been very dynamic and are responding positively to changes in the business environment through the introduction of value added services that have brought a new perspective to the customer’s fuelling experience. In addition to this, training of management is vital to the success of the firm. Recommendations based on the findings of this study propose that the lobbying body KIPEDA (Kenya Independent Petroleum Dealers Association) took a more aggressive approach towards encouraging financial institutions to lend to their members at attractive interest rates. Entrepreneurs can use a variety of marketing tools such as banners and signs that can help draw attention to the business. They can use these to promote special offers, highlight new products and also advertise the other value-added services they may be offering. The association should also organize seminars and workshops for the owner managers, managers as well as the staff of these on areas such as customer service, basic mechanical operations and product knowledge with a view enhancing their profitability and efficiency