1.1 Background to the Study
Market research is a continuous process for collecting, investigating and interpreting information about a particular market. It is an essential part of any business that wants to offer products or services that are focused and well targeted. Business decisions that are based on good intelligence and good market research can minimize risk, pay returns and are communicated better (Kamau, 2010).The current customers' experiences is a valuable information source, not only are these customers views allowed for the gauging of how well their expectations are met but they are also told where things were getting right and more importantly where things are getting wrong.
Market research helps to identify opportunities by evaluating the potential for a new idea. Market research creates benchmarks and helps to measure the progress. It is important in that one identified potential customers as they also understand the existing customers (Minlan, 2009). The market research is any organized effort to gather information about markets or customers. This is a very important component of business strategy. Market research is mostly used interchangeably with marketing research (Sarkees, M. (2011), but expert practitioners have drawn the distinction that marketing research is concerned only with marketing processes, while market research is concerned specifically with markets.
As defined by the International Code on Market and Social Research (ICC/ESOMAR), Market research includes social and opinion research and is the systematic gathering and interpretation of information about individuals or organizations using statistical and analytical methods and techniques of the applied social sciences to gain insight or support decision making, (Rausch, 2007). Market research began to be conceptualized and put into formal practice during the 1920s, as an offshoot of the advertising boom of the Golden Age of radio in the United States. Advertisers began to realize the significance of demographics revealed by sponsorship of different radio programs.
In Kenya, the SMEs are the drivers of the economy and as such through the sessional paper number 2 of 2005 the government recognized their impact on the economy. The challenge arises as SMEs are unstructured and as such their management is dependent on the survival of the owner and also they do not invest much in the market research. Beside the information of the target market, one also needed the information of one\'s competitors, customers, products amongst others (Yang & Coates, 2010). Lastly, one may need to measure the effectiveness of the market research. It is therefore wise that before investing in business and spending money on a new venture, (Sen, 2010), the business considered conducting market research first. In Nyeri town like any other part of the country, management of most small and medium enterprises had not effectively embraced the aspects of market research hence lack of information to improve and maintain good performance of their enterprises. Yet, an inclusion of aspects of market research helped to identify glaring areas in the firms' short falls in their products and services. This gap in performance was the basis of the study which determined the role of market research in the performance of the small and medium enterprises. (Neely, Adams, 2011) identified the key reason for business strategic failure as the organization's processes not being aligned with its strategies. The business processes were put into four separate categories as develop products and services, generate demand, fulfill and maintain demand, lastly plan and manage the enterprise. This formed the basis of the four objectives identified in this study.
1.2 Statement of the Problem
Globally SME's have been defined differently by different countries, they are a pillar to any economy and as such they require information to enhance their performance. Increased competition has led businesses to demand more of market research to improve on performance
The importance of market research has often been overlooked and underestimated by various businesses. Some of the main reasons for this is lack of business acumen, the belief that market research is a very expensive exercise, that it requires too much time and that it is too hard and that it shall only be conducted if one is starting up a big business entity or corporation (Eng, 2009). Big corporations do not share out how they conduct their market research; there must have been an input of market research in their success.
Lack of embracing Market research could pose the following challenges: Potential investors could not invest in the venture where the entrepreneur has failed to provide adequate research coupled with facts about their business industry; The cost of acquiring a new client of the company could be expensive and most likely not measurable (Sen, 2010) SMEs form the informal sector hence the challenge of performance due to poor management and lack of laid down structures. It therefore confirms that firms fail due to lack of study of their products and customer behavior in the market (Fabayo, 2009).
(Bergh off, Philip and Uwe, 2012) in a study on the benefits of market research assert that the failure of undertaking market research could place the businesses where the majority of their success would be dependent on luck rather than market strategy. Despite the fact that market research could help the business identify and recognize their threats and opportunities, aspects of market research was ignored and consequently this formed part of the source of poor performance for SME in Nyeri town.
A considerable number of research such as Measuring Performance in Small and Medium Enterprises, have been carried out on the performance of SMEs but few have tried to explain the relationship between product research, customer survey, market trend analysis and competitor analysis in this research and as such the need to understand the role played by market research to give information on performance and hence fill up the performance gap. Market Research strategies used need to consider the rapidly changing needs of the market place and the demands of business looking for a competitive edge which affected the performance of SME. Today, Market research has adapted to innovations in technology and the corresponding ease with which information is available, this further raises the demand for a thorough market research (Garengo, P., S. Biazzo, et al. 2008). This would be in order to understand the motivations behind the customers, consumers and competitors behavior and hence better their performance in the SME, thus the need for Market research. It came out clearly that most SMEs do not undertake Market research and hence their potential is not fully exploited due to lack of adequate information leading to poor performance. Due to the outlined gap in the performance of SME's, the study will seek to fill up an information gap by carrying out this research and confirm that Market research plays a big role in enhancing performance of small and medium enterprises.
1.3 Objectives of the Study
The general objective of the research was to determine the role played by market research in enhancing performance of SMEs in Nyeri town.
The study was guided by the following specific objectives:
i. To determine the role of product research on the performance of Small and Medium Enterprises in Nyeri town.
ii. To examine the role of market trend analysis on the performance of Small and Medium Enterprises in Nyeri town.
iii. To establish the role of customer survey on the performance of Small and Medium Enterprises in Nyeri town.
iv. To determine the role played by competitor analysis in the performance of Small and Medium Enterprises in Nyeri town.
1.4 Research Questions
The study was guided by the following research questions and the conceptual hypothesis.
i. What is the role of product research in enhancing the performance of small and medium enterprises in Nyeri town?
ii. How does the market trend analysis enhance the performance of small and medium enterprises in Nyeri town?
iii. What is the role of customer survey in enhancing the performance of small and medium enterprises in Nyeri town?
iv. What is the role of competitor's analysis in enhancing performance of small and medium enterprises in Nyeri town?
1.5 Significance of the Study
The study is of great importance to the various parties in future. These parties includes customers to benefit from improved service delivery when the outcome of the study is embraced, the employees to be able to work more efficiently and effectively and also the management of small and medium enterprises in Nyeri town to be able to improve on their management of the businesses hence improves performance. Due to this improved performance, the SMEs in Nyeri town are expected to increase their performance by understanding the product research, market trend analysis, customer survey and competitor analysis.
This is a point of reference for the proprietors of SMEs in Nyeri town while making future decisions. The research will equip them with practical skills and knowledge of tailoring solutions to problems in this area. Other researchers undertaking similar studies will benefits from this research as it will provide baseline data for use as reference for future studies.
1.6 Scope of the Study
The study dealt with the SMEs in Nyeri town. A target population of 351 respondents was taken. This population was further sampled out using stratified sampling to come up with a sample of 74 respondents. The researcher concentrated on the trade and service sector
1.7 Limitations of the Study
The study faced various challenges. First, obtaining full cooperation and appropriate responses from respondents posed difficulties. The owners of SMEs were actively involved in their business to conveniently fill the questionnaire, they were allowed more time to fill up the questionnaire and a follow up was done to ensure the data collected was accurate. The other limitation was that the research team had limited practical exposure in the management of Small and Medium Enterprises and as such the study relied on the information provided by respondents. There was a potential bias of self-reporting when data was collected from the owners of SMEs and this may pose limitation to application and accuracy of information (Bayati & Taghavi, 2007). Some of the SMEs owners are not educated to conceptualize what entails market research. The processes within SMEs are much more temporal and less defined than those in large organizations.
1.8 Operational definition of terms
Business Enterprises : This is any entity that sells good and services to its clients
Competitor analysis: assessment of strength and weakness in business of either the current or future potential competitor
Customer survey : common mechanism for gathering the voice of the customer
Market : This is all the current and potential customers or businesses willing to use the company's goods and services
Market Research : This is the systematic gathering and interpretation of information about individuals or organizations using statistical and analytical methods and techniques of the applied social sciences to gain insight or support decision making
Market Trend : This is the upward or downward movement of a market, during a period of time
Product Research : This is a component of market research whereby the characteristic of goods or services that satisfies the need or want are identified
Small and Medium Enterprises: These are businesses whose personnel and capital fall below certain limits depending on specific countries definition
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