Perceived Impact of High Cost of Transportation on Small Scale Businesses in Asaba Urban, Delta State

Perceived Impact of High Cost of Transportation on Small Scale Businesses in Asaba Urban, Delta State

ABSTRACT

This study assessed the perceived impact of high cost of transportation on small scale businesses in Asaba Urban, Delta State. A descriptive survey design was adopted for the study. Three research questions were used for the study. The population of the study comprised of three hundred and eighteen (318) small-scale business owners in Asaba Urban, Delta State. The sample of the study was sixty (60) small-scale business owners in Asaba Urban, Delta State drawn through simple random sampling technique to serve as the representative of the entire population. The instrument used for data collection was a structured questionnaire titled, “Perceived Impact of High Cost of Transportation on Small Scale Businesses in Asaba Urban, Delta State” To ensure the validity of the instrument, copies of the instrument was sent to a lecturer in Business Secondary Education (Business) a lecturer in Educational Measurement and Evaluation for face and content validation. To ensure that the instrument is valid, a pilot study was carried out on ten (10) small scale industry owners in Idemmili South Local Government Area of Anambra State using split-half method. The items will be divided into two and given to two group of respondents. Data was collected and analyzed using Pearson product moment correlation to estimate the reliability and it yielding a correlation coefficient of 0.67 which means that the instrument is reliable. Sixty (60) copies of the validated instrument were administered to the small scale business managers by the researcher with the help a trained research assistants and 55 copies were retrieved which facilitated data analysis.  Data collected was analyzed using frequency count and mean statistics. Findings of the study revealed among others that there are ways of reducing the high cost of transportation on small scale businesses’ marketing and sales in Asaba Urban, high cost of transportation influences small scale businesses’ profitability in Asaba Urban negatively. Based on the findings, it was recommended among others that government should invest more funds into transportation sector to reduce high cost of transportation and transportation companies should collaborate with small scale businesses so as to reduce the negative effects of high cost of transportation on their marketing, sales and profitability.

CHAPTER ONE

INTRODUCTION

Background to the Study

          Modern day society is characterized with ease of movement and doing businesses brought about by technological advancement and modernization. Businesses now depend on certain means of moving their goods and services from one place to another which is made possible by modern day transportation system. The importance of transport in any region cannot be overemphasized.   Transportation, is the movement of goods and services and persons from place to place and the various means by which such movement is accomplished. The growth of businesses and the need to transport large quantities of goods or numbers of people over long distances at high speeds in comfort and safety has been an index of civilization and in particular of technological progress (Lawrence, 2020). According to Good and Jebbin (2018) transportation is a system of carrying passengers, raw materials and goods from one place to the other both internally and internationally, often through power driven machines. Transportation service is the port of physical distribution activity which is concerned with the actual movement of goods to their various consumers (Good & Jebbin, 2018). Without transportation, production cannot be achieved, meanwhile, production is said to be achieved if goods get to the final consumers. Transportation refers to the process of conveying or moving of goods and people from place to place (Anyanwu, 2021). According to Good and Jebbin (2018) transportation is a system of carrying passengers, raw materials and goods from one place to another both internally and internationally, often through power driven machines.

Additionally, transportation systems face the challenges of increase their capacity and to reduce the costs of movements depending on the demand of all users (e.g. individuals, enterprises, institutions, governments, etc.) have to negotiate or bid for the transfer of goods, people, information and capital because supplies, distribution systems, tariffs, salaries, locations, marketing techniques as well as fuel costs are changing constantly (Jean, Claude & Brian, 2020). From this definition, it can be seen that because of the constant increases in transportation, transport companies also increase their cost of transportation according to the increase in fuel price.

Transportation rates are the price or fare of transport services paid by their users to the transport service provider. Transportation rates are in monetary form,  hence, before such price or fare are being paid, transport users will negotiate the monetary cost with the transport service provider based on distance to be covered when moving a passenger or a unit of freight between a specific origin and destination (Justin, 2018). Longman Dictionary of Contemporary English (2018) defines transportation as a process or business of taking goods from one place to another or a system for carrying passengers or goods from one place to another. Transportation service enhances the fulfillment of production because production is said to be achieved if and only if goods get to the final consumers. Without transportation, production cannot be achieved, meanwhile, production is said to be achieved if goods get to the final consumers. When the cost of transportation is high, many people are affected including small scale businesses.

Small scale business is an independently owned organization that requires less capital, less workforce and less or no machinery. These businesses are ideally suited to operate on small scale to serve a local community and to provide profit to the business owner. A small-scale business in Nigeria is often defined as an enterprise with a limited number of employees, typically less than 50 or 100 employees, depending on the specific context. Additionally, the annual turnover or revenue generated by such businesses is relatively low, often falling below a certain threshold, which may vary depending on the sector and location. These businesses are typically characterized by their small asset base and their contribution to local economic development and employment generation.” hese enterprises are typically characterized by their limited size in terms of employees, revenue, and assets. Small businesses are diverse and can be found in various industries, offering a wide range of products and service. A small scale enterprise is a business that is not large, in terms of its size, scope of operation, financial involvement and the workforce involved (Obed, 2019). Most small scale enterprises are owned by one entrepreneur, sometimes a small scale enterprise is said to be a firm that is independently owned and operated and which is not dominant in its field of operation. In general, we should recognize that a small scale business must have few employees, limited capital investment and small scale operation (Nicholas, 2021). The Federal Ministry of Industries (2019) defined a small scale enterprise as an enterprise whose total cost including working capital but excluding cost of land, does not fall below One Million Naira and does not exceed Forty Million Naira and having number of employees between 11 to 35 workers.

The effective operation of small scale businesses is affected by high cost of transportation, the areas affected are marketings, sales, profitability, production and distribution service.

Marketing is the holistic process of identifying, anticipating, and satisfying customer needs and wants through a combination of product development, pricing, promotion, and distribution. It involves researching and understanding the target market, developing a product or service that meets their needs, determining the appropriate price for that product, creating effective promotional campaigns to reach the target audience, and ensuring the product is available to customers when and where they want it (Philip, 2022). Marketing is a strategic, long-term approach to building and maintaining customer relationships and brand reputation. It includes various sub-disciplines like market research, market segmentation, branding, advertising, content marketing, and customer relationship management (CRM). According to Robert (2020), marketing is the strategic process of identifying, attracting, and retaining customers by creating, communicating, and delivering value to them. It involves a wide spectrum of activities, including market research, product development, pricing strategies, advertising, promotion, distribution, and customer engagement. The primary aim of marketing is to understand the needs and desires of the target audience, develop products or services that meet those needs, and effectively communicate the value proposition to potential customers. Marketing strategies often involve segmentation, targeting, and positioning to reach the right customers with the right message at the right time. It also includes the management of a brand’s reputation, customer relationships, and the continuous adaptation of strategies based on market dynamics and consumer feedback. While sales in the other hand is the transactional part of the business process that focuses on persuading potential customers to make a purchase. It involves direct interactions with customers, either through a sales team, retail staff, or online platforms (Philipson, 2020). The sales process typically starts with prospecting and lead generation, followed by approaching potential customers, understanding their specific needs, presenting the product or service as a solution, handling objections and concerns, negotiating terms, and finally, closing the deal. Sales professionals play a crucial role in building and maintaining customer relationships, as they are often the primary point of contact between the company and its customers. Their goal is to convert leads into paying customers, achieve sales targets, and maximize revenue for the company. Marketing generates interest and demand, while sales focuses on converting that interest into actual sales, ultimately contributing to the company’s profitability and growth. Sales is the tactical process within an organization responsible for converting leads or potential customers into actual buyers (Dickson, 2020). It encompasses activities such as prospecting, lead qualification, presenting the product or service, addressing objections and concerns, negotiating terms, and closing the sale. Sales professionals, whether in direct sales, retail, or e-commerce, are the frontline representatives who establish and nurture relationships with customers.

Profitability in the other hand profitability refers to the ability of a business or investment to generate profit or financial gain. It is a measure of how efficiently a company or investment can generate earnings relative to its costs and expenses. Profitability is a key indicator of a company’s financial health and success, as it indicates the extent to which the business can generate a surplus of revenue over its operating costs (Olaniyi, 2018). According to Salami (2019), profitability refers to the capacity of a business or investment to generate a financial gain or profit. It is a measure of the effectiveness with which a company can produce earnings in relation to its costs and expenditures (Obed, 2019). Profitability indicates the degree to which a business can generate a surplus of revenue after covering all its operational expenses and financial obligations, ultimately reflecting its financial success or health (Robert, 2019). This surplus can be used for reinvestment in the business, distribution to shareholders, or other financial objectives. Profitability is a fundamental gauge of an entity’s financial performance and is crucial for assessing its long-term viability and growth potential. It is also a critical factor for investors when evaluating the attractiveness of a company or investment opportunity. Profitability is a multifaceted financial metric that serves as a key indicator of a company’s economic health and performance. It is not limited to a single financial ratio but encompasses various measurements, each providing insights into different aspects of a company’s profit-generation ability (Robert, 2019). These measures include gross profit margin, operating profit margin, net profit margin, return on investment (ROI), return on equity (ROE), and many others.

Production and distribution services are two fundamental components of the supply chain and the broader field of businesses. These services play essential roles in bringing goods and services to the market, ensuring their availability to consumers, and facilitating economic activity. Production services encompass the activities involved in creating or manufacturing goods and services. This process typically includes various stages such as designing, sourcing raw materials, manufacturing, quality control, and packaging (Dickson, 2020). The goal of production services is to transform inputs into finished products or services that meet specific quality standards and consumer demands. This can involve both physical goods (e.g., automobiles, clothing) and intangible services (e.g., banking, healthcare). The efficiency and effectiveness of production services directly impact the cost, quality, and availability of products in the market.

Distribution services on the other hand refer to the activities related to getting finished products or services from the producer or manufacturer to the end consumers (Ronald, 2018). This involves a network of intermediaries and logistics, which may include wholesalers, retailers, transportation companies, storage facilities, and technology systems for tracking and managing inventory. Distribution services ensure that products are available in the right place, at the right time, and in the right quantity to meet consumer demand. Effective distribution is crucial for maintaining supply chains, reducing lead times, and optimizing the delivery of products and services to customers. Production often begins with the design phase, where the concept of a product or service is developed. This phase includes market research, feasibility studies, and the creation of prototypes. Planning involves determining the most efficient processes and resource allocation for production (Roy, 2018). Roy added that distribution services manage these facilities and oversee inventory levels to ensure timely and efficient order fulfillment. Getting products from the manufacturer to the end consumer involves transportation and logistics services. This can encompass various modes of transportation, including road, rail, air, and sea, as well as route optimization, scheduling, and tracking. After the sale, distribution services may continue to interact with customers through customer service and support functions.

Small-scale businesses heavily rely on transportation networks to source raw materials, distribute products, and reach their target markets. The high cost of transportation not only increases operational expenses but also hinders the overall growth and profitability of these enterprises.  Hence the need to ascertain the impact of high cost of transportation on small scale businesses in Asaba Urban, Delta State.

Statement of the Problem

The small-scale business sector in Asaba Urban plays a vital role in the Delta State economy, contributing significantly to employment, income generation, and poverty alleviation. However, one of the major challenges impeding the growth and sustainability of small businesses in Asaba Urban is the escalating cost of transportation. Small-scale businesses heavily rely on transportation networks to source raw materials, distribute products, and reach their target markets. The high cost of transportation not only increases operational expenses but also hinders the overall growth and profitability of these enterprises. These rising costs strain the limited financial resources of small-scale businesses and reduce their ability to remain competitive in the market. Many small businesses are forced to absorb the high transportation costs, thereby affecting their profit margins increases cost of living and overall economic viability. This, in turn, threatens their sustainability and growth prospects.

It is against this background that this study is carried out to ascertain the impact of high cost of transportation on small scale businesses in Asaba Urban, Delta State.

Purpose of the Study

The main purpose of this study is to ascertain the perceived impact of high cost of transportation on small scale businesses in Asaba Urban, Delta State. Specifically, the study seeks to:

1. Determine the ways of reducing the high cost of transportation on small scale businesses’ marketing and sales in Asaba Urban.
2. Examine the influence of high cost of transportation on small scale businesses’ profitability in Asaba Urban
3. Find out the strategies that could help entrepreneurs to cope with the high cost of transportation on small scale businesses’ production and distribution services in Asaba Urban.

Research Questions

The following questions guided the study:

1. What are the various ways of reducing the high cost of transportation on small scale businesses’ marketing and sales in Asaba Urban?
2. What are the factors influencing the high cost of transportation on small scale businesses’ profitability in Asaba Urban?
3. What are the strategies that could help entrepreneurs cope with the cost of transportation on small scale businesses’ production and distribution services in Asaba Urban?

Significance of Study

The study would be of immense benefit to Business Education students, small scale businesses owners, Government, Researchers and the Field of Business Education.

The study would allow students to connect classroom learning to real-world issues. Students can gain insights into the economic challenges faced by small businesses, which make up a significant portion of any economy. This understanding is essential for future business leaders, policymakers, and economists. For students interested in entrepreneurship, understanding the challenges small businesses face, including how transportation costs affects businesses help in making informed decisions about the types of businesses they might want to start and where to locate them.

Understanding the impact of transportation costs allows business owners to develop strategies for cost management and, in turn, improve their financial viability. This study can help identify ways to make the business more competitive by optimizing transportation expenses. Understanding these costs can help businesses devise plans to overcome geographical barriers and tap into new opportunities. This study can shed light on the indirect impact on consumers. The findings of the study can be used to advocate for policies that support small businesses.

For government, understanding the impact of high cost of transportation can help the them develop policies to support and stimulate small businesses, which, in turn, can lead to economic development. The study can provide data to help the government design initiatives aimed at reducing transportation costs and, consequently, boosting job creation. This study can help the government identify regions that are disproportionately affected by high transportation costs and devise strategies to promote balanced regional development. The study can provide insights into the specific challenges faced by small businesses due to transportation costs and guide government interventions. This study can inform government policies that enhance supply chain resilience and reduce vulnerabilities.

For researchers, the study will help researchers identify the extent to which high transportation costs affect the profitability and sustainability of small businesses, which are often the backbone of local economies. Researchers can contribute to understanding how small businesses can enhance their supply chain resilience in the face of high transportation costs. Researchers can explore the environmental consequences of these costs and identify sustainable practices for small businesses. The findings may also contribute to the development of new theories or models in these disciplines.

For the field of Business Education, the study deals with a practical and current issue that directly affects small businesses. It provides a tangible example of how external factors can influence business operations and decision-making.  The study would contribute to the body of knowledge by adding to the literature in the field of Business Education that can serve as reference material.

Scope of the Study

This study focused on perceived impact of high cost of transportation on small scale businesses in Asaba Urban, Delta State. The variables of interest marketing and sales, profitability, production and distribution services. The respondents of the study are small scale businesses in Asaba Urban.

Pages:  73

Category: Project

Format:  Word & PDF         

Chapters: 1-5                                 

Source: Imsuinfo

Material contains Table of Content, Abstract and References.