International Conference on African Development Issues (ClJ-ICA DI) 2015 : Social and Economic Models for Development Track

Competitive Strategy and Performance of

Selected SMEs in Nigeria
Uchegbulam, Princess, Akinyele, Samuel, lbidunni, Ayodotun
Dept. of Business Management,
Covenant university
Ota ,Ogun State, Nigeria
[email protected]
[email protected]
[email protected]

Abstract- The present business environment is characterized possess an edge over rivals firms employ innumerable
by high levels of competition, dynamism and technological competitive strategies, principally because each company's
sophistication. This is especially challenging to organizational strategic style entails custom-designed actions to fit its own
managers since they have to design and implement strategies that circumstances and industry environment [3].
can achieve and sustain higher performance levels. Consequently,
As in most national economies Small and Medium
the topic of competitive strategies plays a pivotal role as
organizations aim at gaining industry leadership. This study set Enterprises are an essential mechanism in achieving
out to investigate the impact of competitive strategy on development and growth of Nigeria's economy. The 2012
performance of Small and Medium Enterprises in Nigeria. Enterprise Baseline Smvey revealed that there are 17, 284,
Gaining insight from existing literature and theoretical models 671 Small and Medium Scale Enterprises in Nigeria,
fom· hypotheses we1·e developed and tested using 1·egression employing 32,414,884 persons and contributing 46.54 per cent
analysis. Copies of well structured questionnaire were of the nation's Gross Domestic Product in nominal terms [4] .
administered to 150 randomly selected SMEs in Ikeja and SMEs are considered the life blood of many economies and
Surulere local government areas of Lagos State. The findings Nigeria is not left out. SMEs are very crucial in most
revealed that there is a relationship between product features
and customer base; product customization and sales growth,
economies including Nigeria in that they contribute a lot in
value added products and revenue growth. It also indicated that terms of GDP and employment [5]. A business is defined as
better product quality has an influence on returns on investment. small in the manufacturing sector if it employs fewer than 100
This research recommended that in order to be more employees [6]. Though there is no certified definition of what
competitive, organizational managers must be strategically aware makes up a medium-sized enterprise, businesses with between
of customer needs and offer unique products and services that 100 and 199 employees are generally considered medium-
satisfy such needs sized [7]
The SME sector of the economy cannot be overlooked
Keywords: Firm Competition, Competitive Strategies, SMEs,
because it plays a very important role in a nation's economy
Resource Based View, performance
and this is true for both developed and developing countries.
They also form a high proportion of business activities and
engender more employment opportunities than the large
I. INTRODUCTION
corporations in recent years [8].
Nigeria's business environment is situated in the midst of a However due to globalization, competition amongst firms
challenging economic landscape and intense competition. is on the rise and SMEs in Nigeria are struggling under this
Therefore, managers are increasingly seeking for strategic intense competitive environment both at the domestic and
approaches to accomplish, improve and sustain organizational international terrain [2]. Despite the economic significance of
performance and competitive advantage. Design and Small and medium Enterprises in Nigeria, they have not
implementation of Strategy must be perceived as important played the expected vital and vibrant role in the economic
components in the firm's management process. This is growth and development of the country [2]. These challenges
because strategy gives the direction that business managers may result from perceived ineffective competitive strategy
have in mind and which way they want to achieve their goals. which is having a negative effect on performance in terms of
Earlier research demonstrated that firms that set out a clear customer base, sales growth, returns on investment and
strategy, for example: a quality differentiation or a cost revenue.
leadership strategy, will outperform those firms that engage a Competitive advantage gives a firm an edge over its rivals
mixed strategy ll J. Amongst the many strategies implemented and an ability to generate greater value for the firm and its
in firms, competitive strategy has been proven as an essential stakeholders. Therefore to ensure survival in a highly
tool globally for any business to remain in the competitive competitive environment such as Nigeria, SMEs have to learn
market environment and gain superior performance [2]. to weather the storms of competition and beat today's
Competitive strategy means consciously choosing to carry out ferocious market forces and volatility by providing quality
activities differently or to perform different activities than products, distinct product features and well packaged value
competitors to convey a unique mix of value [3]. Therefore to adding products that satisfy customer need at affordable prices

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International Conference on African Development Issues (CU-ICADI) 2015: Social and Economic Models for Development Track

with effective promotional strategy. Every firm possesses reasons this research is been carried out to identify
certain unique capabilities and competences that distinguish it competitive strategies that can improve the performance of
from other firms and these features greatly influence its small scale enterprises in Nigeria.
performance in the market and determine to what extent a firm Consequently, the following research hypotheses were
survives the pressure from global market competition. formulated in line with the research problem:
However this cannot be achieved except the right competitive H 1 : Product features do not have an impact on customer
strategy is developed and implemented appropriately. base.
Therefore, this research study aims at examining how H2 : Product customization cannot increase sales growth.
competitive strategies, such as product quality, distinct H 3 : Better product quality does not influence returns on
product features and value adding capacity, influence the investment.
performance of SMEs in Nigeria. H4 : There is no relationship between value added and
revenue growth.
II. STATEMENT OF PROBLEM
Research has made it clear that there has been a fall in III. LITERATURE REVIEW
market growth occupied by various firms in Nigeria, due to A. The Concept of Competitive Strategy
inadequate utilization of their organizations' resources, lack of
Competitive strategy refers to game plan adopted by
implementation of specific policies, strategies and actions
management for competing successfully in their chosen
designed to accomplish market growth in firms are not in
market [3]. It involves the analysis of the market and its
place.
environment, consumer purchase behavior, competitive
Study and explanation of business competitiveness is a
activities, needs and competencies of market intermediaries
recurrent theme studied by academics, consultants and
[35]. Firm's engage competitive strategies as tools for
practitioners. The internalization of economy, dynamic nature
achieving or improving competitive advantage and superior
of the environment, greater competitive firms, the need for
performance in their industry landscape. Thus, the objective of
continuous innovation, product customization and growing
competitive strategy is to devise innovative means of gaining
use of ICT forces firms to face challenges of improving their
market and industry dominance by satisfying buyers' need and
competitiveness. These difficulties are greater for small and
preferences and responding to the sensitive requirements of
medium enterprises because their economy of scale and their
stakeholders [ 12].
resources are less than those of large firms. Research has
Porter developed the theory of generic competitive
documented that 70% of SMEs fail in their first three years of
strategies which, over the years, has remained unquestionably
operations in Nigeria [9].
among the most significant and influential contributions in the
The highly competitive environment for small scale
field of strategy and organizational research. The theory can
businesses in Nigeria has necessitated the need for SMEs to
be recognized as the dominant paradigm of competitive
develop strategic means of survival. Thus it becomes
strategy [ 11]. As stipulated by Porter competitive strategy is
imperative to find out whether generating new product
defmed as a firm's attempt for favorable competitive position
features , will increase their scale of productivity and reflect
in its industry. Porter's positioning school of thought has been
also on their customer base. Ability of top management to
a dominant one in the strategic field. The name positioning
properly analyze the market is one of the crucial aspects of
school originated from Porter's central idea that an
marketing rules [34]. It is when a unique selling proposition is
organization should aim at attaining ' competitiveness through
created with the aim of increasing the scale of product.
positioning' and enhance financial performance. It provides a
Lack of better product/service quality and delivery,
firm with activities to generate offensive and defensive
inadequate product customization and poor personnel
positions in an industry and thereby produce a superior returu
management has hindered sales volume of various SMEs and
on investment. Accordingly, firms need to adopt a competitive
their performance. This is as a result of narrow out- look to
strategy to secure a competitive advantage. Competitive
issues regarding competitive strategy planning, formulation,
strategy is the capability of the firm to do its activity in a way
implementation and evaluation, research and development on
or distinct ways other competitors cannot realize [13]. A firm
product quality and service delivery.
is able to achieve sustainable competitive strategy when it
Furthermore there is an urgent need for small scale firms
implements the strategy of value creation that is not
(SMEs) to gear effort towards increasing profitability because
implemented by opponents in the industry [14]. In other words
of the severe competition they face from multinational
competitive advantage is the objective of competitive strategy
companies in the market and the need to meet consumer's
[3].
requirement for quality, quantity and price. In order to achieve
this entrepreneur must put in place adequate competitive B. A BriefReview ofS'ME's ' Operations and Challenges in
strategy that would be responsive to customer satisfaction, Nigeria
revenue growth and increased returns on investment [I 0]. Small and Medium Enterprises play crucial roles in the
Despite the fact that the products produced by small and development process in most of the developed and developing
medium enterprises are cheaper, relevant available statistics countries. Many nations have realized the value of small
data shows marginal improvement in this area. Base on this businesses. They are characterized by dynamism, witty

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International Conference on African Development Issues (CU-ICADD 2015: Social and Economic Models for Development Track

innovations, efficiency, and their small size allows for faster Nigeria [9]. SMEs in Nigeria continue to face numerous
decision making process. problems such as, unstable macro-economic environment.
Over the years there have been controversies in literature This results in costly operating environment due to high
concerning appropriate definitions of SMES. Nigeria is still inflation and high import dependency, high debt burden on the
struggling to get a unified defmition out of the several Nation, lack of access to technology and best of breed
inconsistent and ambiguous definition proffered by several business solutions, business services, consulting and training.
industries and agencies such as the 1992 review by the Government bureaucracy, which increases SMEs operating
National Council on industrial Standards that defmed small costs ,such as unfriendly judicial process, regulatory and
and medium scale enterprises (SMEs) as enterprises with total business environment. Lack of managerial facilities and
cost (including working capital but excluding cost of land) enterprise support services such as limited capacity to business
above N3lm but not exceeding N3 , 150m, with a labor size of associations, for example Chambers of Commerce. Lack of
between 11 and 100 employees. The Federal Ministry of short and long-tem1 capital.
Industries defines a medium scale enterprise as any company
C. SMEs Engagement of Competitive Strategies
with operating assets less than 200 million, and employing
less than 300 persons. A small-scale enterprise, on the other Performance is a crucial concept in management research.
hand, is one that has total assets less than 50 million, with less Managers are judged based on their firm's performance. Good
than 100 employees. The National Economic Reconstruction performance influences the firlllS' continuation. Firm success
Fund (NERFUND) defines a SSE as one whose total assets is is manifested in attaining competitive position or series of
less than l 0 million, but made no reference either to its armual competitive positions ensures superior and sustainable
turnover or the number of employees. financial performance [15]. Indeed achieving superior
SMEs are known to be very vital to the development of performance requires that firms adopt strategic postures that
every economy; though small in size they have contributed will aggressively give them a firm hold of their market.
greatly to the enhancement of major economies of the world Therefore, top management must focus on organizing their
[44]. They are considered the back bones of the Nigerian businesses to be customer oriented and proactive to industry
economy due to their multiple contributions. The 2012 competition [34].
Enterprise Baseline Survey reveals that SMEs in Nigeria Competitive strategies represents the firms' strategic
employ over 32,414,884 people indigenes of the nation. choice and orientations about how to compete for improved
Employment generation capacity of about 58% of global perfom1ance [38]. There are pointers to the fact that careful
working population. SMEs constitute major avenues for selection of appropriate strategies reflect managerial
income generation and participation in economic activities in skillfulness, entrepreneurial capacity and likelihood of long-
the lower income and rural brackets of developing societies term firm survival [39]. Across geographical boundaries and
especially in agriculture, trading and services. SMEs industrial sectors, competitive strategies have been found to
contribute up to 46.7% of national GDP in nominal terms [4]. have significant impacts on performance [40]. A study carried
They also offer veritable outlets for technological out in Kenya's health sector found cost leadership, product
advancement especially in businesses with rudimentary and market development, market focus and differentiation
technology requirements. strategies significant result in higher performance levels [42].
In fact, SMEs are generally regarded as the driving According to Vlachvei, Notta and Demiri [43] examined the
force of economic growth and development, thus in order to effect of competitive strategies on growth and profitability of
aid and sustain SMEs, the Federal Government has put in the Greek Fur industry. their research reflected that larger
place some facilities such as The Establishment of the Small firms perform better than smaller firms, especially in terms of
Scale Industries Credit Scheme (SSIC) - In 1971 , the then growth of sales. However, smaller firms seemed to out
Federal Military Administration started to provide a more perform larger firms in the area of profitability. This trend
direct form of financial assistance to SMEs. As a first step, could reflect the importance of irmovative processes and the
government established a Small Industries Development inclusion of customer relationships in business activities;
Program to provide technical and financial support for the smaller firms are more prone to have competitive advantages
SMEs. Later, Small Industries Credit Committee (SICC) was in this regard. The literature on strategy defmes three
established to administer Small Industries Credit Fund (SICF) necessary consistent set to explain linn success [15]. First the
all over the federation. The establishment Of Industrial firm must develop and implement a consistent set of internal
Development Centre (lDC) was another important effort of the goals and functional policies that jointly defines its position in
Federal Government to promote SMEs under the second the industry. The second requirement for success is that this
national development plan (1970 - 1975). Under the plan, internally consistent set goals and policies align the firm's
N800,000.00 was allocated for setting up IDCs in various strength and weakness with the opportunities and threats in the
parts of tl1e country. external environment. Finally the firm's strategy must be
Despite these new initiatives and repeated attempts by centrally concerned with the creation and exploitation of its so
both the government and the private sectors to promote the called distinctive competences. These are unique strengths that
activities of SMEs in Nigeria, research still documents that set the foundation for a competitive success.
70% of SMEs fail in their first three years of operation in

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International Conference on African Development Issues (CU-ICADI) 2015: Social and Economic Models for Development Track

It is expected the present research will be reflective of the leveraging the unique resources and strategies. Financial
adoption of competitive orientations by Nigeria SMEs and performance is influence by intangible assets, resource
reflect the strategic patterns with which firms in this industry qualification and also mediated by right selection of
engage competitively for superior performance levels. competitive strategy. Integration of intangible resources,
competitive strategy and company performance become one
IV. THEORETICAL FRANlEWORK solution in globalization phenomenon, specifically in SMEs
A. Resource Base View (RBV) sector.
The resource based view (RBV) is a management tool B. Porter's Generic Strategy
used to evaluate the resources available in the firm. In essence, Porter's generic strategies define how a firm pursues
the resource-based view is based on the idea that the effective Competitive advantage across its chosen market place. He
and efficient application of all useful resources that the explains that a firm must either decide to attempt gaining a
organization can gather helps determines its competitive competitive advantage by producing at a lower cost than its
advantage. It seeks to explain the internal sources of a firm's rivals or differentiate its products and services or sell them at a
sustained competitive advantage. Its innermost proposition is premium price. Basically, strategy is about two things:
that if a firm is to attain a state of sustainable competitive deciding where you want your business to go, and deciding
advantage it must obtain and control valuable, rare, inimitable, how to get there. A more absolute definition is based on
and non- substitutable (VRIN) resource and capabilities, plus competitive advantage, the purpose of most corporate strategy.
have the firms in the place that can absorb and apply them According to [ 16] Competitive advantage grows out of value a
[14]. The resource base view as a foundation for the firm is able to create for its buyers that exceeds the firm's cost
competitive advantage of a firm is rooted primarily in the of creating it. Value is what buyers are willing to pay, and
application of a bunch of valuable tangible or intangible superior value stems from offering lower prices than
resources at the organization's disposal [17]. Wernerfelt in his competitors for equivalent benefits or providing unique
1984 paper titled "A resource based view of the firm'' argued benefits that more than offset a higher price. There are two
that the success of a firm in its product market was a result of basic types of competitive advantage: cost leadership and
its advantages in the factor market (or resources) [12] gave a differentiation. An organization's relative position in an
practical approach to the resource-based view, by calling them industry is given by its choice of competitive advantage (cost
the 'core competence of the corporation'. They also clarified leadership vs differentiation) and it's a choice of competitive
that to add value to the finn, resources must be inimitable. scope. Competitive scope distinguishes between firms
Barney identified four characteristics of resources that would targeting broad industry segments and firms focusing on a
be required to generate sustainable competitive advantage to narrow segment. Generic strategies are useful because they
firms - resources must be valuable, rare, inimitable and non- characterize strategic positions at simplest and broadest level.
substitutable (VRIN) [14]. Porter also indicated that achieving competitive advantage
Company's strategy is a vital part of the firm's requires a firm to make a choice about the type and scope of
organizational system that will play a crucial role in its competitive advantage. There are different risks inherent in
improving the business performance. The production of goods each generic strategy, but being "all things to all people" is a
and services as well as wealth creation is dependent on the sure recipe for mediocrity- getting "stuck in the middle"
resources available to the organization especially the
intangible assets [19]. Intangible asset and effective STRATF(:;I r: Af)VANT Ac;F

management are sources of competitive advantage. This has Uniqueness Perc.i"'d by

Lawcnst
pushed most firms to improve the performance of its non- STRATEGIC Cl.IStcmers

monetary assets because the strategy influences the overall TARGET

performance of the company significantly [45]. It's been O..erall Cost
Industry Differentiation
argued by experts that intangible resources are more able to LeacE!rshio
Wide
generate sustainable competitive advantage [20]. Intangible
resources are strategic assets to achieve SCA (sustainable ~ STUCK IN THE MIDDLE J--
competitive advantage) because it meets the criteria of Partiwlar J

Valuable, Rare, Imperfectly Imitable, non-substitutable Segment Focu;

(VRIN), [14]. The substance of thought is that competitive Only
l
advantage can only be attained by implementing the right
competitive strategy. Intangible assets that generally mediated Fig. 1. Pmter' s (1985) Generic Strategy Model , Source: [16]
selection strategy to attain the SMEs performance are based C. Innovation Theory
on the following views. Intangible assets use theory of
Innovation can be said to be the application of novel ideas
Resource Based Value (RBV). The assumption is that every
to products, processes, or other parts of the activities of an
firm is an aggregate of unique resources and capabilities that
organization that cumulates to an increment in "value." This
become the basis to determine the strategy and the principal
value is described in a wider way to include higher value
source of business in generating returns [21]. [17] and [14]
postulates that firn1s obtain competitive advantage by

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International Conference on African Development Issues (CU-ICADI) 2015: Social and Economic Models for Development Track

added for the company and benefits to consumers or other chosen based on their high level of commercial activities.
firms. Ikeja, apart from being the capital of Lagos state, is one of the
Two important definitions were identified by Schumpeter. most popular locations in the state with a population that is
Product innovation: the introduction on a new product or quit hard to estimate because of its dual economic state as a
adding extra value to an existing product. Process Innovation: commercial town and residential town. This local government
the introduction of a new process for producing or delivering is been considered as the heart of Lagos. Nevertheless
goods and services. Surulere is not left out of the business life of Lagos. This local
Schumpeter argued that innovation and technological government has been considered the home of many small
change of a country originates from its entrepreneurs, or wild businesses especially those in the service sector.
spirit. He developed the term UnternehmerJ;eist, in German Additional focus is provided to this research by
which means "entrepreneur-spirit" , and asserted that "the considering only registered SMEs due to the fact that this
doing of new things or the things that are already being done research is concerned with SME strategy and performance and
in a new way" stemmed directly from the efforts of it is more likely that these will be evident in businesses that
entrepreneurs. SME owners are basically considered as are legally organized as proprietary companies [29].
entrepreneurs. The acknowledgement that SMEs play a vital Two constructs were measured in this study and these are:
role in innovation has led to a number of insights about the competitive strategy and performance. Competitive strategy
mechanisms by which SMEs improve and introduce new was measured by product features, customization, added value
products and services. SMEs can have an innovative and product quality. On the other hand performance was
advantage as a result in different management structures [27]. measured by sales grO\vth!volumc, grO\vth in returns on
The bureaucracy in big firms is not conducive to engage in investment, growth in customer base and growth in revenue.
risky R & D, as decisions must survive several organizational The questionnaire was made up of six sections
layers of resistance, where an aversion to risk results in a bias A,B,C,D,E,F. section A contained six main questions that
against undertaking new projects l33J. ln SMEs, decision reveals the demographical characteristics of the respondents.
making process is not rigid nor follows a strict hierarchy; Section B contained ten questions measuring the impact of
decision to innovate is made by a small number of people. product features on customer base. Section C also contained
Innovation activity also succeeds in environments free from ten questions measuring the effect of product customization on
bureaucratic constraints [27]. Several SMEs have benefited sales growth/volume. Section D also had tens questions
from the exodus of researchers thwarted by the managerial measuring the impact of better quality products on returns on
constraints of larger firms. investment, while section E focused on questions measuring
Finally, larger firm also tend to promote successful the relationship between added value and revenue growth. The
researchers to management positions, while SMEs can lace responses for section B-E were made using a Spoint Likert
innovative activity at the center of their competitive strategy scale ranging from !(strongly disagree) to 5 (strongly agree).
[33]. Section F contained to opened- ended questions

V. RESEARCH METHODS VI. DATAANALYSISANDRESULTS

The population of this study was the top managers of small
and medium firms in Lagos, precisely in 50 randomly selected TABLE I. REPRESENTATIVE Of TilE DEMOGRAPIIICAL CHARACTERISTICS
OF RESPONDENTS AND THEIR FIRMS
SMEs in Ikeja and Surulere areas of Lagos State, Nigeria. A
database on small and medium firms held by the Nigerian items frequency Percent
National MSME collaboration survey of 2012 provided the Gender
population of 4535 SMEs in Lagos. A sample size of between Male 70 51.9
100 and 200 is considered appropriate given a research Female 65 48.1
involving a fairly large population [28]. Consequently, a Total 135 100%
sample size of 150 was used for this research work. Age bracket
150 questionnaires were distributed to randomly selected 2o years 29 21.5
SMEs in the study locations; and 135 were returned lo the 21-31 years 79 58.5
researcher, which gives an effective response rate of 90%. The 31-40years 23 17.0
Cronbach' s alpha reliability revealed a suitable result of 0.862 41 and above 4 3.0
which is above the expected value 'of0.7 [30]. The process of Total 135 100%
distributing the questionnaire was a drop-off approach [32]. Marital status
Due to the logic of this method the researchers, within a space Single 89 65.9
of two weeks, hand-delivered the questionnaires to the Married 38 28.1
respondents, explained to them the purpose of the study, stated
Divorced 4 3.0
the required procedures in filling the questionnaire and
Widow 3 2.2
answered questions regarding the questionnaire statement.
Others 1 0.7
The research is concerned with only SMEs in Lagos
Total 135 100%
precisely Ikeja and Surulere. These two localities where

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International Con±erence on African Development Issues (CU-lCADl) 2015: Social and Economic Models for Development Track

Educational Oualification argument d1at for a finn to achieve competitive advantage it

WAECO/OLEVEL 29 21.5 must offer something different trom its rivals. For SMEs to
OND/HCE 17 12.6 remain competitive in their chosen market there is the need for
BSC/HND 61 45.2 ilieir product/service offerings to satisfy customer's unique
M.sc/MBA 21 15.6 taste. This implies iliat top management must be conscious of
PHD 4 3.0 specific demands of their customers and remain sensitive to
Od1er 3 2.2 ilieir taste and preferences. Customers perceive value in
Total 135 100% products that satisfy them [46]. Thus management should
Designation ensure iliat from design to distributions products arc value
adding to customers. Better quality product and services also
Supervisor 33 24.4
reflect valuable means of organizational financial
Manager 42 31.1
performance. Evidences from iliis research are that SMEs get
Managing director 38 28.1
better value for their investment when quality remains
Oilier 22 16.3
tmcompromised. Therefore management support for
Total 135 100% product/service quality must be ensured and enforced in all
Specialization aspects of the firm's work processes. Employees should also
Retailers 46 34.1 be encouraged and enlightened about quality with regards to
Wholesalers 45 33.3 customer relationships. Indeed, customers understand when
Manufacturer 25 18.5 employees are committed to serving them right and very often
Oiliers 19 14.1 customer tmst is built when quality relationships are ensured
Total 135 100% l47J. Product customization are means used by SMEs to
Source: field survey, 2015 differentiate ilieir products from rivals and by providing more
value for the customers' money they achieve a competitive
Descriptive infonnation of the sample as showed in table 1 position in the market. The outcome of this research indicate
reveals that SMEs in Lagos are largely dominated by the male that customizing products in line with customers ' taste, colour
gender making (70)51 ,9% of ilie total respondents. It also preferences, and even social status enhance organizational
showed that majority of ilie respondent fall within the youthful worth.
age of21-30years. Most respondent were single (89) 65.9% of
total respondents. They were mostly learned giving iliat most VIII. CONCLUSION
of them had a BSC/HND. The table reveals iliat majority were Research has revealed that in a dense competitive business
managers (42) 28.0% of ilie total respondents. Finally ilie emironment such as Nigeria survival is the top most priority
table 1 above reveals iliat most respondent were specialised in of firms. This has not been an easy task for most SMEs in
the retailing sector of the state. Nigeria due to high level of competition from larger firms,
All hypotheses were strongly supported. For hypothesis lack of government support and even adequate funds to run
H1 , ilie result indicated that product features have a significant ilieir operations. For this reason it is necessary for SMEs to
positive impact on customer base (p=0.560,t = 6.431 , p ::=: formulate adequate strategies as iliey give direction to what
0.01). Product customization also had a significant positive ilie business has in mind and also helps identify ways through
effect on sales growth (H2: ~=0.343 t = 5.407, p ::=: 0.01) as which they can achieve their goals. To ensure survival SMEs
hypothesised in H2. For hypoiliesis H3 , the result indicated must compete and to do so competitive strategies such as
that better quality product has a significant positive effect on porter's generic strategies, resource base strategy and others as
returns on investment (~=0.546 t = 6.322, p ::=: 0.01). For H1- viewed in theoretical framework are required. Development of
H3 ilie linear regression was used to test the significance. On these strategies would enable SMEs consciously carry out
the oilier hand ilie correlation was used to test for H4. This their activities differently or to perform different activities
showed that there exist a significant positive relationship ilian competitors to convey a unique mix of value [31].
between added value and revenue growth (r = 0.562, P < They must bear in mind that d1ey are within a highly
0.001, n = 135). competitive business environment and must adopt efficient
and effective competitive marketing strategies in order to
constantly have an edge over competitors as well as expand it
VII. DISCUSSION all ramification.
This study examined the impact of competitive strategy on
SMEs' performance in Lagos. Competitive strategies adopted IX. SUGGESTION FOR FURTHER STUDY
for this study include product features, product customization, This research was carried out to evaluate tl1e impact of
quality products and added value. The study showed that competitive strategy on the performance of SMEs in Nigeria
product features, customization, better quality products, and with a limited focus of lkeja and Suru1ere local governments
added value are highly adopted by the sampled SMEs to of Lagos state. By implication, generalized conclusions cannot
enhance ilieir customer base, sales growth, returns on be drawn. However. studies that extend attention to more local
investment and revenue growili. The findings support Porters governments in Lagos, or by extention across states in Nigeria

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International Conference on African Development Issues (CU-ICADI) 2015: Social and Economic Models for Development Track

will give more generalized conclusions. Also, we suggest that [12] G. Hamel, & C.K. Prahalad. "The five Generic Competitive
future research in this area can be carried out on the Strategies ', 1980
comparative perfonnance of SMEs in relation to their strategy [13] K. Ylvijo, and E. Osomani, "Competitive Advantage and its
implementation. Impact in Small and Medium Enterprise," European Scientific
Journal., 2013
X. RECOMMENDATION [14] J. Barney, "Firms resources and sustained competitive
Based on the finidings the following recommendations as how advantage," Journal of Management," 27, 643-650, 1991
SMEs can become more compelitve and make a difference in the [151 M. Porter, "Towards a dynamic theory of strategy," Strategic
industry were developed. management journal, 1991
SMEs should seek to be more creative and innovative when it [16] M. Porter, "Competitive Advantage," The Free Press, New
comes to product designs and ensure customer satisfaction through York, 1985
effect delivery of services to customer and adequate response to their
[17] B. Wemerfelt, "A resource- Based View ofthe Firm," Strategic
needs .
Management Journal, Vol. 16, No.3 , 171-174, 1984
Product differentiation is a great strategy for SMEs that seck to
be distinguished from others . To achieve this SMEs should try and [18] Sampurno, Manajemen Strategik: Menciptakan keuanggulan
customize their product or in other words produce product with bersaing yang berkelanjutan (Penerbit UGM , Y ogyakarta 2010)
different designs and multi features so as to be able to meet each [19] Husnah, B. Subroto, , Djumahir, and S. Aisjah, "Competitive
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