CHAPTER I
The Problem and Its Scope
1.1
Introduction and Background of the Study
As our world is innovating and facing progress, entrepreneurs are arising and
people just think of earning money. Individuals became more business-minded and with
these, various businesses arise. These businesses bring a lot of benefits to the economy
of our country and serves as its backbone. According to the Philippine Business Registry
(PBR) as of July 2018 there are 46,924 registered businesses in the Philippines. These
businesses comprise from small-medium enterprises up to the largest companies
existing in the industry (PBR, 2018).
Small and medium sized enterprises (SMEs) make up 99.6 percent of all
registered businesses in the Philippines and employ over 70 percent of the working
population (Wai Fong, 2018). The small and medium enterprises sector is an important
segment in many economies (Canare, Jamil & Price, 2017). With the existence of these
small-medium enterprises are also the subsistence of large companies.
Sindangan is one of the first-class municipalities in the province of Zamboanga
del Norte. As years go by, the municipality becomes more and more progressive. Big
establishments, large companies and major businesses were recently established in the
town. Before the existence of these major businesses, are the small and medium
enterprises that support the economic status of the municipality. We all know that the
existence of large businesses will surely offers great opportunities and benefits to the
municipality of Sindangan.
1.2 Theoretical and Conceptual Framework of the Study
The overwhelming presence of SMEs in the industrial landscape of economies of
all types and sizes is a universal phenomenon. Their role and contributions in the
process of economic growth and social progress is on record globally. SMEs die
prematurely in numbers, especially those started as "distress-pushed" or "survivaldriven" self-employment seeking units in the developing countries. But there are those
which are "entrepreneur driven" typically seeking to exploit business opportunities
perceived and capable of driving structural transformation of an economy through
innovation, employment creation, and productivity increase. (Ahmed, 2016)
This present study conducted by the researchers is based on the following theories:
The Small is Beautiful Theory
The Small is Beautiful Theory that was written by Shumacher (1973), is a classic
critique of the trends towards centralization, corporation, and globalization’s nonsustainability nature. In the theory, it advances the promotion of small-scale economic
markets and system, co-operatives and greater decentralization. The theory also argues
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the phrase “too big to fail” which make people thinks that big businesses are the
optimum.
The Dominance Theory of Corporate Power
The Dominance Theory of Corporate Power stated that corporate world holds so
much power and is the dominant force at work in the society, and able to make
changes that further its own interests. The interests of large corporations don’t
necessarily dovetail with those of smaller entities such as small businesses, the
individual or with society at large; the concentration of power in the hands of those
who run the biggest corporations is problematic. The theory also holds that no
countervailing power exists to adequately rein in or offset the influence of corporations
wishing to flex muscle. Indeed, groups or entities that might be expected to offset
power -- government, for instance -- instead may begin to serve corporate interests.
The same may be said of lobbies, such as those expected to work on behalf of small
business (Johnson, 2010).
Theory of Economy Development-Place of the Small Business
The theory of economic development–place of small business by Schumpeter
(1942), argues that government has begun to initiate new policies and supports for
SMEs growth and development that later turn them into large enterprises following the
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agitation and needs for SMEs involvement in an economy. Schumpeter instigated this
theoretical viewpoint that states larger businesses are likely to be more productive.
Conversely, the alternative theoretical perspective of Arrow (1962) contends that
smaller businesses are more productive. The author argued that in the presence of
competition (such as when a number of smaller firms are competing with each other),
the monopolist tends to lose out in innovating, since the rents extracted by maintaining
the monopoly power exceeds the benefits of the lower prices brought about by
innovation. However, smaller firms will be able to benefit by innovating under these
conditions, because the lower prices and costs resulting from innovation leads to
competitive advantages in the marketplace.
Resource-based Theory
The resource-base theory stems from the principle that the strength of firm’s
competitive advantage lies in their internal resources, as opposed to their positioning in
the external environment. This theory as a basis for the competitive advantage of a firm
lies primarily in the application of a bundle of valuable tangible or intangible resources
at the firm’s disposal (Penrose, 1959).
In the same theory, Barney (1995) agitated further that instead of simply evaluating
environmental opportunities and threats in conducting business, competitive advantage
depends on the unique resources and capabilities that a firm possesses. The resourcebase view of the firm predicts that certain types of resources owned and controlled by
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firms have the potential and promise to generate competitive advantage and eventually
superior firm performance (Ainuddin et al., 2007).
Survival-based Theory
The survival-base theory is a theory that presents strategies that firm uses to
avoid being exterminated by competitors. The theory stated that, one process- sensing,
intuition, feeling, thinking- must be developed by a business manager in order to
succeed in innovativeness and high intellectual and practical capacity to run his
company with bold jump and should be ready to accept the uncertainty (Gibcus, 2003).
Basically, the underpinning of survival strategy is that organization needs to
continuously adapt to its competitive environment in order to survive. Each decade
seems to bring a new way of thinking about the business environment and new ways of
acting (Brian 1996).
Dynamic Capability Innovative Theory
The dynamic capabilities approach was built upon the resource-base theory
(RBV) (Teece, Pisano & Shuen, 1990). However, as Priem and Butler (2001) stressed
RBV is essentially a static theory since it does not explain the evolution over time of the
resources and capabilities that form the basis of competitive advantage. Hence, it is not
enough to view a firm as a bundle of resources, but note also the „mechanisms by
which the firms learn and accumulate new skills and capabilities, and the forces that
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limit the ratio and direction of this process‟ (Teeceet al., 1990). In this sense, Teeceet
al. (1997) define „dynamic capabilities as the firm‟s ability to integrate, build, and
reconfigure
internal
and
external
competences
to
address
rapidly
changing
environments‟. Indeed, innovation is considered a critical driver of economic growth in
the formulation of the endogenous growth theory (Abosede and Onakoya, 2013).
Figure 1 represents the conceptual model of the study. The model shows the
representation of the independent and dependent variables of the study. Emergence of
major businesses is the independent variable and the effects to small-medium
enterprises as the dependent variable.
Independent
Variable
Dependent Variable
Small-Medium
Enterprises
Emergence of
Major Businesses
Figure 1. Conceptual Model of the Study
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1.3 Scope and Delimitations of the Study
The study covered the effects of the emergence of major businesses on smallmedium enterprises in the municipality of Sindangan. The target sample of the study
was drawn from the selected small-medium enterprises in merchandising from of
business. The current research randomly selects from merchandising type of businesses
in the municipality of Sindangan. The study was conducted in the heart of the
municipality barangay Poblacion, Sindangan, Zamboanga del Norte for the year 20182019.
1.4 Statement of the Problem
This study aimed to find out the effects of the emergence of major businesses to
the small-medium enterprises. Specifically, answered the following questions:
1. What is the demographic background of the business owners of small-medium
enterprises in terms of age, religion, cultural background and sex?
2. What are the observations of the entrepreneurs on the effects of the emergence
of major businesses to the small-medium enterprises in terms of:
a. Physical Factors
b. Cognitive Factors
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3. Is there a significant effect of the emergence of major businesses to the smallmedium enterprises?
1.5 Research Hypothesis
There was no significant effect of the emergence of major businesses towards
small- medium enterprises.
1.6 Objectives of the Study
The primary concern of this study was to determine the effects of the emergence
of major businesses to small-medium enterprises specifically to achieve the following
objectives:
1. To determine the socio- demographic profile of the entrepreneurs in terms of
age, religion and sex.
2. To determine the observation of the entrepreneurs on the effects of the
emergence of major businesses to the small-medium enterprises in terms of:
a. Physical factors
b. Cognitive factors
3. To distinguish the significant effect of the emergence of major businesses to the
small-medium enterprises.
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1.7 Significance of the Study
Major Businesses are those big businesses that can easily get an income. This
study, “The Emergence of Major Businesses: Its Effects to Small-Medium Enterprises”,
aims to determine the possible effects of major businesses to small-medium
enterprises.
The readers of this study acquired new knowledge on how enterprises work in
the world of business.
This section discussed the beneficiaries and the benefits they can get from this
study:
Consumers. Consumers are the lifeblood of the business for without them, businesses
would not work and earn profit. The consumers are the one that serves as the main
reasons why businesses are existing. The consumers have benefited in this study in
many ways through this research study they would be able to get informations that
would be a great help for their purchase decisions and in making choices of where to
buy the products that they need and also this study would enable to assess the
consumer’s preferences like buying in big enterprises rather than in small-medium
enterprises or vice versa.
Business Owners of Small-Medium Enterprises. Business owners of small-medium
enterprises are the primary beneficiaries of this study in the sense that by this research
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study the owners would know there standing in the industry with the existence of major
businesses in the area. They would also know the possible effects of the existence of
major businesses in their business and with these, business owners of small-medium
enterprises could prepare tactics and strategies in case of getting negative effects from
the emergence of major businesses, after getting information of the possible effects
from the emerging major businesses, the business owners could also assess the status
of their business.
Owners of Major Businesses. Owners of major businesses can also benefit in this
study in the means of knowing their roles in the business industry as a bigger player
and also know if their existence means a competition to small-medium enterprises.
1.8 Definition of Terms
To facilitate better understandings about the concepts used in this study, the
following terms are theoretically and operationally defined:
Customer. A person who buys goods and services (Cambridge Dictionary, n.d.). In this
study, it was used as the preference of small-medium enterprises to know their
stand in the industry.
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Merchandising Business. A commercial enterprise dedicated to the purchase of finished
goods and their resale for a profit (Business Dictionary, n.d.). In this study, it
was used as one of the scope of limitations and the range of this research study
as to what form of small-medium enterprises would be included in this study.
Major Businesses. Businesses whose total assets, profits and net income exceeds the
capacity of
SMEs shall be defined as major businesses and whose employees
are greater
than 100 (Robles,2018). In this study, it is defined as the
independent variable that will give effects to the dependent variable which is the
SMEs.
Small-Medium Enterprises. Small-medium enterprises shall be defined as any business
activity or enterprise engaged in industry whether single proprietorship,
cooperative, partnership or corporation whose total assets, inclusive of those
arising from loans but exclusive of the land on which the particular business
entity’s office, plant and equipment are situated, must have the value equal or
less than 15,0000,000. In this study, it is defined as the dependent variable that
will be affected by the emergence of major businesses.
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