EFFECT OF BRANDING IN ENHANCING PROFITABILITY OF SMALL AND MEDIUM ENTERPRISES IN NASARAWA STATE
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This study was carried out to examine the effect of branding in enhancing profitability of small and medium enterprises in Nasarawa State. The primary objective of this study is to construct a verbal conceptual model to explain strategic stages of branding those are exclusive for SMEs in Nasarawa State. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. The data collected were presented in tables and analyzed using simple percentages and frequencies. It was discovered that small and Medium Enterprises (SMEs) play a vital role in both developing and developed countries because to their sizable contribution towards country’s growth. Irrespective of the growing importance of SMEs in global economy, a major portion of industry is performing as a commodity. Any movement as a commodity normally creates a situation where a product category may lose its identity in the midst of clutter of brands. The study concludes that branding has major role to play to increase the competitive edge of SMEs for long run profitable survival.
- Background of the study
The need for prudence is vital because of the rapid velocity of change in emerging markets. The increasing degree of competition in business environment gives specific indication of the evolution of thinking and change in the process of doing business. In the present dynamic situation manufacturers are feeling the need for offering distinct values. In this scenario, Small and Medium Enterprises (SMEs) play a vital role because in both developing and developed countries, promoting small and medium-sized enterprises is one of the most viable strategies for achieving national development goals such as economic development, strengthening the industrial base, and local production structure (Hallberg, 2000). SMEs represent a sector of growing importance and play an important role in the growth of emerging nations especially with regards to providing employment and driving economic development (Kula and Tatoglu, 2003).
The role of the entrepreneur is crucial for brand orientation in SMEs to be able to introduce differentiated products in domestic and international markets. High brand orientation in SMEs ultimately leads to better financial outcomes via improved branding practices and performance (Renton et al., 2016). Small and medium enterprises (SMEs) are a dominating form of business as they are majority wealth creators in most economies (Spence & Hamzaoui Essoussi, 2010). SMEs catalyze global growth though some SME businesses have low levels of survival, especially in the early phases. In a global context, branding can be an advantage to SME owners (Agostini, Filippini, & Nosella, 2015). An understanding of branding among SMEs is therefore necessary to improve early stage SME outcomes through brand orientation and brand management (Renton, Daellenbach, Davenport, & James, 2016).
Hermanson (1989) defines profitability as the organizations’ capacity to create income while its incapability to create income is a loss. The key measures of profitability are the gross profit margin, net profit margin, return on total assets and return on common stockholders’ equity. Profitability growth improvement is paramount for firms, especially manufacturing firms; it assists the firms to ensure their sustainability as going concerns, stakeholder returns are also safeguarded and enhanced, and so on.
A brand name is that portion of the brand which can be spoken, including letters, words or numbers. A brand mark is that portion of the brand that cannot be expressed verbally, such as a graph design or a symbol. Some of the world’s most recognize brands are Mercedes-Benz. A brand mark is often referred to as logo, but it must be noted that a logo can also refer to distinctive type or style such as coca- cola’s elegant script. Many companies offer several brands under one company name. In developing a marketing strategy for individual products, the responsibilities rest on the shoulders of the seller to confront the branding decision. In product strategy, branding is one of the most important issues that must be considered.
The success of any business or consumer product depends in part on the target markets ability to distinguish one product from another. Branding is the principal instrument used by marketers and companies to distinguish their products from that of competitors. It is regarded perhaps that, the most distinctive skills of professional marketers is their ability to create, maintain, protect and enhance brands. For centuries, business people have been devising ways to identify their wares and to distinguish them from those of competitors. Pictures were used in the early years because many potential customers were illiterate. Meaningless product names such as Kodak as created in 1988 by George Eastman, however, branding goes beyond just choosing a product name. In effect, a brand can encompass a name, a phrase, a design, a symbol or any combination of these so as to distinguish one product from another.
Over the years SMEs are showing a positive growth throughout the globe. Irrespective of the growing importance of SMEs in global economy, a major portion of industry is performing as a commodity. In a competitive field success of a product depends largely on its top of the mind recall by its target consumers. Any movement as a commodity normally creates a situation where a product category may lose its identity in the midst of clutter of brands. In this context, ‘Branding’ has major role to play to increase the competitive edge of medium and small enterprises for long run profitable survival. Present global competition has made it mandatory for manufacturers of this industry to come out of their cocoon of conservative business procedures and transform themselves as per the need of changing market tastes and preferences. Branding can be crucial to a firm’s long-term success. The branding process is especially important for SMEs that wish to become players outside their domicile. It is furthermore important to determine which among many variables and processes affect success in branding.
- STATEMENT OF THE PROBLEM
Some owners of SMEs in Nigeria struggle financially because of their weak brand recognition (Hong & Diep, 2016; Renton et al., 2016). Fifty-three percent of service SME owners in Nigeria are unaware of branding strategies, and 23% of service SME owners have insufficient knowledge of branding strategies (Gundala & Khawaja, 2014). The general business problem is that some SME owners do not use branding, and this negatively impacts the profitability of their firms. The specific business problem is that some service SME owners in Nigeria lack branding strategies to improve the financial performance of their companies. The above challenges led to the study on the effect of branding in enhancing profitability of small and medium enterprises in Nasarawa State.
- OBJECTIVE OF THE STUDY
The main aim of this study is to examine the effect of branding in enhancing profitability of small and medium enterprises in Nasarawa State. The objectives of the study are;
- To ascertain the impact of branding in enhancing profitability in small and medium enterprises in Nasarawa State.
- To ascertain the relationship between branding and organizational profitability small and medium enterprises.
- To assess the influence of branding on customers services in Nasarawa State
- To determine the mediating effect of customer service on branding and organizational profitability
1.4 RESEARCH HYPOTHESES
For the successful completion of the study, the following research hypotheses were formulated by the researcher;
H0: There is no impact of branding in enhancing profitability in small and medium enterprises in Nasarawa State.
H1: There is impact of branding in enhancing profitability in in small and medium enterprises in Nasarawa State.
H0: There is no significant relationship between branding and organizational profitability small and medium enterprises.
H2: There is a significant relationship between branding and organizational profitability small and medium enterprises.
1.5 SIGNIFICANCE OF THE STUDY
This study will give a clear insight on the impact of branding in enhancing profitability in manufacturing sector. The study will be beneficial to students, manufacturing sectors and the general public. The study will serve as a reference to other researchers that will embark on this study
1.6 SCOPE AND LIMITATION OF THE STUDY
The scope of the study covers the effect of branding in enhancing profitability of small and medium enterprises in Nasarawa State. The researcher encounters some constrain which limited the scope of the study;
a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
c) Organizational privacy: Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities
1.7 DEFINITION OF TERMS
BRANDING: A brand is a name, term, design, symbol, or other feature that distinguishes an organization or product from its rivals in the eyes of the customer. Brands are used in business, marketing, and advertising.
ENHANCING: Intensify, increase, or further improve the quality, value, or extent of.
PROFITABILITY: The degree to which a business or activity yields profit or financial gain.
SMALL AND MEDIUM ENTERPRISES: Small and medium-sized enterprises or small and medium-sized businesses are businesses whose personnel numbers fall below certain limits. The abbreviation “SME” is used by international organizations such as the World Bank, the European Union, the United Nations and the World Trade Organization.
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