Environmental Factors Affecting Innovative Leadership Towards Sustainable Growth of Manufacturing Small and Medium Enterprises

Research Article: 2020 Vol: 26 Issue: 4

Small businesses, particularly manufacturing SMEs perform a starring role in influencing economic growth, alleviation of poverty and creation of job employment, especially in South Africa where youth unemployment continues to be in the rise. The development, monitoring, support and protection of manufacturing SMEs in KwaZulu-Natal (KZN) need urgent priority, not only from business owners/managers but also from the government. This is due to concerns over the environmental challenges that hover on the existence of manufacturing SMEs. These influences affect manufacturing SMEs’ production planning and manufacturing, market performance and their continued and successful existence. For manufacturing SMEs to foster economic stability and continue to contribute to the country’s economic development, the identification and exploration of environmental factors influencing manufacturing SMEs needs to be addressed. Therefore, the empirical findings showed that inadequate support from shareholders/boards, capital and business performance were recognized as the main internal factors that had an impact on manufacturing SMEs, while social factors and rapid technological changes were the main external factors that influenced business sustainable growth. The recommendations were extended on various aspects which were essential to the sustainability and business growth of manufacturing SMEs

Mục Lục

Keywords

Entrepreneurship, Environmental Factors, Smes, Manufacturing, Sustainability,
Business, Growth.

Introduction

The environment in which businesses operates is a fundamental factor that has a
considerable influence on manufacturing SMEs. Environmental factors are things over which
manufacturing SMEs have little or limited control, other than to consider them within their
strategic planning (Kokemuller, 2018). These influences affect their production planning and
manufacturing (Ibrahim & Primiana, 2015). Not only do they influence the processes and
operations of manufacturing SMEs, but they also affect their market performance (Brașoveanu &
Bălu, 2014). In fact, they influence the continued and successful existence of manufacturing
SMEs (Slitharam & Hoque, 2016). The business environment has important repercussions on
the gross margins of the enterprise (Nguimkeu, 2013).

The concept of whether small businesses contribute to any country with the intentions of
growing has been widely researched, with many authors (Ngibe & Lekhanya, 2019a; Rees, 2019;
The World Bank (2020) indicating that small businesses are the spine of any developing and developed country, in fact they are responsible for driving sustainability growth and
development. These small businesses manage to achieve this through the creation of job
opportunities across regions and sectors, for both skilled and low skilled employees (OECD,
2018; International Labour Organization, 2019; Michael, 2019). The small business sector also
plays an influential yet critical role in developing and steadying a country’s economic status
(Edmiston, 2017; Obi, Ibidunni et al., 2018; Rungani & Potgieter, 2018). This means that there
is a huge responsibility placed upon a sector that is plagued with so many environmental
challenges which constantly limit their intentions to attain rapid innovation and business
sustainable growth. Scholars have long identified series of environmental factors likely to affect
small businesses with management skills, financial access, technology adoption, competition, as
well as business environment, being identified as the key challenges affecting SMEs (Msomi, et
al., 2019; Ngibe & Lekhanya, 2019b). This study intends to further explore other unprecedented
environmental factors that affect manufacturing SMEs ability to grow and be sustainable. This is
conducted with the purpose of ameliorating the environmental struggles that pose a negative
effect on the existence of manufacturing SMEs in KZN.

Primary Objective

This study’s primary objective is to identify and explore the influence that environmental
factors have on entrepreneurs towards sustainable growth of manufacturing SMEs. To achieve
the intentions of this study, the following objectives need firm prioritization.

Secondary Objectives

1. To ascertain environmental factors negatively affecting manufacturing SMEs towards sustainable growth.

2. To explore the impact that environmental factors have on manager’s/leaders ability to achieve sustainable
growth of manufacturing SMEs in KZN.

Literature Review

The following section provides a broad literature review discussion, in support of the aims
and objectives of this study. The literature is divided into two categories, namely, internal and
external environmental factors.

Internal Factors

The internal factors exist inside the operational base of the company and straightforwardly
impact the distinctive part of business. These are occasions, factors, HR, frameworks,
authoritative material, and operational activities inside the firm which are commonly heavily
influenced by the organization (Hartzell, 2018).

Resources Impact On SMEs Manufacturing Sustainability

Although known for their enormous growth potential and significance to the economy
(Choi, & Lim, 2017) manufacturing SMEs have often failed to harness this potential. According
to Beynon et al. (2014) manufacturing SMEs require resources, awareness and capabilities to
rapidly improve their efficiency and operational effectiveness, since they are seriously oppressed
by several obstacles in accessing these resources (Snyman et al., 2014; Chikozore, 2017). Added pressure has resulted from the globalization of markets which creates tougher competition, often
associated with more rapid technological changes (Dadfar et al., 2013). Specific barriers can
prevent manufacturing SMEs from accessing these strategic resources, in turn hindering
competitiveness in a globalized and digitalized economy (OECD, 2017).

For manufacturing SMEs to carry out innovation, they will need to address these factors
and find strategic ways to acquire the resources needed for innovation (Woschke et al., 2017)
and to maintain competitiveness (Zhang & Chen, 2009; Haron et al., 2013). Andrae and Beckma
(2013); Mutambi (2013) maintain that these factors, if not addressed, will continue to hinder
manufacturing SMEs from tapping into the available business opportunities or to achieve
progressive innovation (Shemi, 2013). The decisions of business leaders to pursue innovation
are a key determinant of the economic performance of the enterprise (Bayarçelic et al., 2014).
However, innovation only becomes possible when leaders are given access to the appropriate
resources including funds, materials, facilities, human resources and access to skills development
(Horth, 2014).

Business Networking A Key Concept for Manufacturing SMEs Innovation

As early as 1934 the theorist Schumpeter pointed out that the innovative activities of a firm
promote competitive advantage which is key to growth and sustainability. One of the key
elements that can promote innovation within small businesses is business networking. Networks
are strategic approaches created for expanding new ideas that promote innovation and growth
initiatives (Ludmila & Stanisava, 2015; Schøtt, 2018). Kero et al. (2017) add that direct and
indirect networking ties are formal sub-unit structures that larger firm are able to institute
because of their greater capacity and resources, while small businesses have to be constantly
alert to windows of opportunities in this regard, due to their more limited resources (Gunawan,
2015). Networking is seen to have an important positive influence on innovation and growth for
manufacturing SMEs (Ueasangkomsate & Jangkot, 2017; Loanid et al., 2018; Oberg, 2018).
Behncke (2015) demonstrated that networks and networking provide access to complementary
knowledge that strengthens intangible knowledge and grants access, as well as contributing to,
innovation initiatives. It may also allow manufacturing SMEs to gain access to other
organisations’ resources (Garg & Kumar De, 2014). These resources can enable innovation
(Oskam et al., 2018).

Supplier’s Involvement Influence Business Sustainability and Growth

Manufacturing SMEs currently operate in an uncertain and complex environment which
includes inconsistent customer predilections and constantly advancement in technologies
(Rodriguez-Ferradas & Alfaro-Tanco, 2016). One of the key strategies that they can adopt in
order to maintain their relevance, is to shift from a closed, individual, innovation approach to an
open approach, where external collaboration is identified and used (Okinwale, 2018). Bothof &
van Weele (2018) identify suppliers as crucial external collaborators as they are clearly essential
in new product development and process innovation. The inclusion of suppliers in a company’s
networks was seen by Reiss (2010) as a useful strategy given the suppliers’ specific expertise
and resources and their impact in product innovation (Sherman, 2018). Raassens et al. (2012)
also find that the inclusion of suppliers allows for the expansion of manufacturing networks and
an opening up to new innovative ideas. Sayed & Sunjka (2016) add that the benefits of supplier
involvement include negotiation of prices, clearer product specification and better delivery networks. Okinwale (2018) stated that manufacturing SMEs need to consider collaborations with
prominent suppliers, especially since they do not independently possess all the skills necessary
for successful innovation. This is due to the fact that firms that fail to innovate within its sector
of the market will subsequently be eliminated (Adelowo et al., 2017).

External Factors

External environment encompasses all the events over which a company has no control as
they happen outside of the organisation (such as competition, economic, training, financing and
technology) and yet they have the power to positively and negatively influence the operations,
production, business integration and innovativeness of any firm (Wahyuni et al., 2016; Ayandibu
& Houghton, 2017).

Technology in Manufacturing Sector

Many businesses have come to the realisation that technology in the modern world of
manufacturing is ever pervasive and essential. In the last decades preceding the 90s, technology
has revamped the manner in which businesses are operated due to it being indispensable
(Kolaski, 2018). Technology has created ease in the business lively-hood as it expedites business
processes; performs complex tasks within a limited time frame with positive and accurate results
(Mehra, 2019). This indicates that the influence of technology in manufacturing SMEs is
pertinent, in particular to production processes, service delivery and business operations (World
Economic Forum, 2017). Due to technological advancement, manufacturing and production has
become more self-organized and more autonomous (World Economic Forum, 2018). Basically,
technology contributes immensely towards strengthening competitive advantage of a firm which
is needed for business sustainability and growth (Obunike & Udu, 2018). The need for
manufacturing SMEs to adopt technology is of great importance if they are serious about
competing in a global market and most importantly sustaining their business growth. However, a
lot of manufacturing SMEs are constantly finding it excessively difficult to pursue technological
innovation (Farsi & Toghraee, 2014), and South African manufacturing SMEs are no exception.
The adoption of advanced technologies in SMEs in South Africa is of great concern owing to
many businesses citing the lack of resources as an unavoidable factor (Sayed & Sunjka, 2016;
Leboea, 2017). Kusumaningtyas and Suwarto (2015) further claim that limited financial
resources, skills capabilities and staff training limit the adoption and to some extent the usage of
advanced technology in manufacturing SMEs. It is therefore argued that for manufacturing
SMEs wanting to utilize technology, they will have to identify technology that is going to best
suite and intervene on functions and operations of the firm. Manufacturing SMEs need to start
embracing modern technology if they are to sustain and grow their businesses. As the adoption
of technology goes a long way in ensuring customer responsiveness, customer loyalty, decision
making process and strategies, and improves the overall business operations (Madadipouya,
2015).

The Influence of Competition towards Business Sustainability in Manufacturing SMEs

Competition represents an extraordinary danger to the development and endurance of a
firm, and yet it is frequently rivalry that is the primary factor in accomplishing monetary
development as it propels and pushes firms to be increasingly profitable (Soini & Veseli, 2011). A firm’s rivals are a significant piece of its outer condition, since contending firms don’t have
command over items, costs and administrations offered by different firms (Beach, 2017). A firm
has an upper hand when it executes techniques of significant worth creation that have not been
presented by other plausible contenders. Competition amongst manufacturing SMEs is
intensifying due to changing customer preferences and needs and to effectively adjust to the
quickly changing business condition, the endeavours to keep up and improve operational
execution through constant advancement are essential (Pickard-Whitehead, 2018). Zelga (2017)
argues that a firm can only be sustainable if it has durability competition that is constantly
nurtured and preserved in line with the changes in the business market environment. This can be
executed by being responsive to the changes in the business environment and quickly adapting
the operating strategies to help maintain competitive advantage. Having a firm with critical
manufacturing competences such as human talent for technical and execution skills,
manufacturing facilities, explicit technical skills, and technology skills can help manufacturing
SMEs to utilise all that into its competitive advantage (Madadipouya, 2015).

Infrastructure Affects Innovation of Manufacturing SMEs

Infrastructure refers to the basic equipment, facilities and structures such as roads, bridges,
electricity, telecommunication, education, water supply, sanitation and sewerage that are the
government created services essential for the operations and functionality of manufacturing
SMEs (Gaal & Afrah, 2017). Lack of good infrastructure that is accessible and well-functioning
acts as a severe hindrance to economic development (Ehler, 2014). The need for efficient
infrastructure, more especially in developing economies, before fact fundamental to the survival
of manufacturing SMEs (Perkins, 2011). Electricity failure hinders the production process of
goods, efficient service delivery, and poor roads affect the product circulation systems. This
according to Agwu & Emeti (2014) greatly influences transportation costs as establishing
alternative or dual transportation can hinder the firm’s profits (Muriithi, 2017). These issues
were further highlighted in a study conducted by Seda (2012) that found poor quality and
inconsistency of supporting infrastructure stalled the innovative capacity of manufacturing
SMEs. This means that the continued load-shedding in South Africa due to ESKOM’s
instabilities puts a heavy strain on manufacturing SMEs’ operations.

Social Factors Affecting Innovation

Henry (2010) sees social factors as those that upset not only individuals, but business
thought and behaviour within social settings. These factors affect the market strategies put in
place by firms, whether big or small (Gachuhi, 2016). Indris and Primiana (2015); Luebke
(2017) claim that entrepreneurs often lack the ability to study and understand social environment,
of which it is one of the main hurdles that affect creativity and innovation. Therefore, it is
imperative for entrepreneurs to study and understand social factors and use them to the
enterprises advantage and to influence innovativeness and competitiveness (Rujirawanich et al.,
2011). Being responsive to social factors enables entrepreneurs to instigate effective innovation
which is responsive to the current social needs and preferences.

Shareholder and or Stakeholder Impact on Business Sustainability

Corporate governance is a broad term that describes the processes, customs, policies, laws
and institutions that direct organisations and corporations in the way they act, administer and
control their operations (Khan, 2011). Therefore, corporate governance is an expect framework
intended to coordinate and deal with the firm, based on respectable corporate governance values
which are transparency, responsibility, accountability, freedom and impartiality (Naimah &
Hamidah, 2017). With comprehensive corporate governance, the rights and responsibilities are
dispersed amongst management, a board of directors, shareholders and stakeholders of the firm,
and decisions, procedures and other highly prioritized operations concerning the affairs of the
firm are simplified (Feleaga, et al., 2011). Through corporate governance, it is expected that the
overall performance of the firm is enhanced through strategized innovation, allocation of
required resources and proper management (Duca, 2012). Fundamentally, shareholders and
boards of directors are essential in intensifying proper governance and control of management of
resources in order for a business to achieve its planned goals (Basu, 2018). This means that the
manufacturing SMEs needs to start considering the involvement of shareholders that are going to
influence business decision making and the functionality of the enterprise, for the purpose of
achieving profitable returns. Therefore, sustainability of the firm is a prerequisite for attracting
more investors to the enterprise.

Methodology

This study adopted a quantitative research approach where a questionnaire was identified
and utilized as a suitable primary data collection instrument. The study’s population consisted of
manufacturing SME owners/manager whose businesses were situated in KwaZulu-Natal, South
Africa. Out of the 74976 recorded SMEs in KwaZulu-Natal as per the Seda report, 2012, a
sample size of 384 was established using a convenience sampling method. A population of
74976 is well represented by a sample size of 384 (Sekaran & Bougie, 2010).

Due to the large sample size, statistical software was sought to relieve any human errors.
The data gathered from participants was therefore cleaned, coded and cross-checked for any
errors, and was analysed using SPSS version 26.0. A descriptive analysis was performed with
frequency testing, reliability test, Chi-square test and component matrix being deemed essential
for this study. Tables have been used to present the findings of the study.

Reliability Test

In order for reliability of the instrument to be tested, the usage of Cronbach’s Alpha was
identified and used to test for reliability. A reliability coefficient was tested at 0.70 which is the
generally accepted and considered figure. This indicates that a coefficient score that is higher is
considered as “acceptable.” For this study, a reliability test score achieved was 0.798 under the
category of environmental factors that affected business sustainability of manufacturing SMEs.

Findings

The empirical findings of this study address the environmental factors affecting innovative
leadership in achieving sustainable business growth. The section that follows discusses the internal and external factors proving to be impacting on innovative leadership quest to
maintaining and sustaining the business growth.

The results as depicted in Table 1 above shows that 39.8% agreed and 31.5% strongly
agreed that inadequate support from shareholders/boards of directors has an influence on
business sustainable growth. These findings illustrate that almost 3 quarters (71.3%) of the
respondents viewed inadequate support from shareholders/boards of directors as one of the
significant internal factors that influence business sustainability and growth. The Chi-Square test
(X2 =186.125; df = 4; P = 0.000) further affirms that inadequate support from
shareholders/boards of directors poses as a serious threat to manufacturing SMEs sustainable
growth. Fewer respondents (17.2%) were neutral to the statement, whilst 11.2% viewed
inadequate support from shareholders/boards of directors as insignificant to business
sustainability.

Table 1 Inadequate Support From Shareholders/Boards of Directors has an Influence on Business Sustainable Growth

Frequency
Percent
Chi-Square
Significance (p-value)

Strongly Disagree
10
2.6
186.125
0,000

Disagree
33
8.6

Neutral
66
17.2

Agree
153
39.8

Strongly Agree
121
31.5

Total
383
99.7

System
1
0.3

Total
384
100.0

The results as depicted in Table 2 above show that 39.6% and 25.8% of the respondents
agreed and strongly agreed respectively that lack of support from employees affects business
sustainability and growth. These findings show that almost 2 thirds (65.4%) of the respondents
agreed that inadequate support from employees has a negative impact on entrepreneur’s ability to
sustain and maintain business growth and sustainability. The Chi-square test (X2 =148.188; df =
4; P = 0,000) further confirmed that inadequate support from employees in driving the motives
and objectives of the business affects business sustainability and growth. Fewer respondents (15.6%) were in disagreement to the statement whilst only 18.8% of the respondents were
neutral.

Table 2 Lack of Support From Employees Affects Business Sustainability and Growth

Frequency
Percent
Chi-Square
Significance (p-value)

Strongly Disagree
10
2.6
148.188
0,000

Disagree
50
13.0

Neutral
72
18.8

Agree
152
39.6

Strongly Agree
99
25.8

Total
383
99.7

Missing
System
1
0.3

Total
384
100.0

The results as depicted in Table 3 above show that 47.1% agreed and 28.6% strongly
agreed respectively that capital and business performance influence business sustainable growth.
These findings show that slightly above 3 quarters (75.7%) of the respondents regarded capital
and business performance as the highly influential factor towards the realisation of business
sustainability and growth. The Chi-square test (X2 =251.807; df = 4; P = 0,000) further
confirmed that there is significant impact between capital, business performance and business
sustainable growth of a firm. Very few respondents (11.2%) were in disagreement with the
statement whilst only 13.0% of the respondents were neutral. Based on these findings,
manufacturing SMEs capital and business performance needs to be progressively monitored and
preserved if they are to achieve business sustainability and growth.

Table 3 Capital and Business Performance Influence Business Sustainable Growth

Frequency
Percent
Chi-Square
Significance
(p-value)

Strongly Disagree
5
1.3
251.807
0,000

Disagree
38
9.9

Neutral
50
13.0

Agree
181
47.1

Strongly Agree
110
28.6

Total
384
100.0
100.0

The results as depicted in Table 4 above show that 24.0% agreed and 17.4% strongly
agreed respectively that business sustainability is affected by infrastructure, whereas, 30.8% of
the respondents were in disagreement with the statement. A notable number (27.6%) of the
respondents were impartial, reflecting that the respondents were unsure on whether business
sustainability and growth is affected by infrastructure. These findings indicate that just above 3
thirds (41.4%) of the respondents viewed infrastructure as influential to business sustainability.
The Chi-square test (X2 =55.655; df = 4; P = 0,000) confirmed that infrastructure has an
influence on businesses sustainability. It is important to indicate that, based on these findings; infrastructure was not conclusively regarded as the most significant influence towards the
attainment of business sustainable growth by manufacturing SMEs in KZN. Probably, this is due
to the fact that manufacturing SMEs operate in different industries and the respondents’
perceptions about infrastructure will differ in many aspects.

Table 4 Business Sustainability and Growth is Affected by Infrastructure

Frequency
Percent
Chi-Square
Significance
(p-value)

Valid
Strongly Disagree
24
6.3
55.655
0.000

Disagree
94
24.5

Neutral
106
27.6

Agree
92
24.0

Strongly Agree
67
17.4

Total
383
99.7
100.0

Missing
System
1
0.3

Total
384
100.0

The results as depicted in Table 5 above show that 44.3% agreed and 24.0% strongly
agreed respectively that inadequate business networking affected business sustainability and
growth. This means that more than 3 thirds (68.3%) of the respondents identified networking as
a component that is seriously being neglected by manufacturing SMEs in KZN. A Chi-square
test (X2 =190.036; df = 4; P = 0,000) further supported these findings. Fewer respondents were
neutral to the statement with 18.8%, whilst only 13% of the respondents were in disagreement
with the statement, probably believing that networking has no influence on business sustainable
growth.

Table 5 Inadequate Business Networking Affects Business Sustainable Growth

Frequency
Percent
Chi-square
Significance
(p-value)

Valid
Strongly Disagree
13
3.4
190.036
0.000

Disagree
37
9.6

Neutral
72
18.8

Agree
170
44.3

Strongly Agree
92
24.0

Total
384
100.0
100.0

To complement the findings above, a component matrix test was conducted for the above
discussed figures (Tables 1 to 5). This was performed to establish whether the respondents
collectively viewed (based on the statements above) internal factors as key factors that
influenced manufacturing SME owners and managers to achieve business sustainability and
growth. Based on these results, the respondents’ only responded to only one category of
component, with all components tested reflecting a positive significance. These results
conclusively reflect that the tested statements were viewed by the respondents as internal
environmental factors that greatly influenced business sustainability and growth shows in Table 6.

Table 6 Internal Factors Influencing Sustainable Growth of Manufacturing SMEs

Internal factors
Component

Inadequate support from shareholders/boards of directors has an influence on business sustainable growth
0.670

Lack of support from employees affects business sustainability and growth
0.744

Capital and business performance influence business sustainable growth
0.724

Business sustainability and growth is affected by infrastructure
0.690

Inadequate business networking affects business sustainable growth
0.870

The section below discusses the findings on external factors that affect business
sustainability and growth of manufacturing SMEs.

The results as depicted in Table 7 above show that 34.6% agreed and 22.7% strongly
agreed respectively that business sustainability is affected by supplier costs. These findings
show that more than half (57.3%) of the respondents perceived supplier costs as one of the key
influence to business sustainability. The Chi-square test (X2 =82.458; df = 4; P = 0.000)
confirmed that supplier costs has an influence on business sustainability. However, 24.2% of the
respondents were in disagreement with the statement whilst 22.7% of the respondents were
neutral.

Table 7 Business Sustainability is Affected by Supplier Costs

Frequency
Percent
Chi-Square
Significance
(p-value)

Valid
Strongly Disagree
22
5.7
82.458
0.000

Disagree
71
18.5

Neutral
87
22.7

Agree
133
34.6

Strongly Agree
71
18.5

Total
384
100.0
100.0

The results as depicted in Table 8 above show that 44.0% and 20.8% of the respondents
agreed and strongly agreed respectively that social factors influence business sustainability.
These findings indicate that almost 3 thirds (64.8%) of the respondents perceived social factors
as an external factor that influences business sustainability. This means that entrepreneurs who
are timely responsive to the needs of the customers are more likely to achieve business
sustainability and growth. The Chi-square test (X2 =175.837; df = 4; P = 0,000) further
confirmed that social factors which are beyond the control of the firm influences business
sustainability. Therefore, as an entrepreneur, it is wise to study the market trends and customer
preferences so that you can make be more alert and make informed decisions which can
positively influence business sustainability.

Table 8 Business Sustainability is Influenced by Social Factors

Frequency
Percent
Chi-Square
Significance (p-value)

Valid
Strongly Disagree
13
3.4
175.837
0,000

Disagree
49
12.8

Neutral
70
18.2

Agree
169
44.0

Strongly Agree
80
20.8

Total
381
99.2

Missing
System
3
0.8

Total
384
100.0

The results as depicted in Table 9 above show that 43.5% and 38.0% of the respondents
agreed and strongly agreed respectively business sustainability is affected by rapid technological
changes. These findings indicate that business sustainability is affected by rapid technological
changes. This means that a significant number (81.5%) of the respondents perceived
technological changes as a key catalyst to business sustainability. The Chi-square test (X2 =287.386; df = 4; P = 0,000) further confirmed that there is a strong significance between
business sustainability and technological changes. These findings indicate that for manufacturing
SMEs to achieve business sustainable growth, they will have to invest on modern technologies.
Therefore, decisive strategies are needed from manufacturing SMEs on how they intend to keep
up with the constant changes in technology whilst operating on limited financial resources. Very
few respondents (9.1%) were in disagreement with the statement, whilst only 8.6% of the
respondents were not quite sure whether technological changes had any significant impact
towards business sustainability.

Table 9 Business Sustainability is Influenced by Social Factors

Frequency
Percent
Chi-Square
Significance (p-value)

Valid
Strongly Disagree
14
3.6
287.386
0,000

Disagree
21
5.5

Neutral
33
8.6

Agree
167
43.5

Strongly Agree
146
38.0

Total
381
99.2

Missing
System
3
0.8

Total
384
100.0

The results as depicted in Table 10 above show that 45.3% and 39.6% of the respondents
agreed and strongly agreed respectively that business sustainability is influenced by competition.
These findings show that a significant number of the respondents (84.9%) perceived competition
as influential to business sustainability. The Chi-square test (X2 =337.937; df = 4; P = 0,000)
confirmed that competition amongst businesses affect business sustainability. These findings
provide an outlook on the importance of a firm to establish competit ive advantage over its competitors if they are to survive on this congested business environment. Very few respondents
(5.7%) were in disagreement with the statement, with only 8.6% being neutral to the statement.

Table 10 Business Sustainability is Influenced by Competition

Frequency
Percent
Chi-Square
Significance (p-value)

Valid
Strongly Disagree
5
1.3
337.937
0,000

Disagree
17
4.4

Neutral
33
8.6

Agree
152
39.6

Strongly Agree
174
45.3

Total
381
99.2
100.0

Missing
System
3
0.8

Total
384
100.0

This component matrix is an additional statistical analysis of the above figures Table 7–11.
A component test was conducted on the statements on external environmental factors that had an
influence on manufacturing SMEs towards sustainable growth. The respondents have indicated
to two categories of components, and a strong to moderate significance was identified, indicating
that respondents believed that external environmental barriers had an impact on business
sustainable growth of manufacturing SMEs. The test further revealed that the respondents had a
split view on whether supplier costs (0.079) had an impact on sustainable growth of
manufacturing SMEs. This means that even though supplier costs and affected manufacturing
SMEs, not all the respondents viewed them as critical environmental barriers that affected the
sustainability of the firm.

Table 11 Component Matrix: External Factors Influencing Business Sustainability and Growth of Manufacturing SMEs

External factors
Component

1
2

Business sustainability is affected by supplier costs
0.079
0.878

Business sustainability is influenced by social factors
0.712
0.344

Innovation is affected by rapid technological changes
0.785
0.206

Business sustainability is influenced by competition
0.635
0.024

Conclusion and Recommendations

It is concluded that both internal and external factors were identified and considered to
have a significant influence on business sustainable growth within manufacturing SMEs. The
empirical findings showed that capital and business performance, inadequate support from
shareholders/boards of directors, employee support and inadequate business networking were
identified as the main internal factors that had an impact on business sustainability. In terms of
external factors, competition, fast changes in technology and social factors were the main
identified significant external factors that influenced business sustainability and growth. It is
therefore concluded that if entrepreneurs of manufacturing SMEs are serious about the firm’s
continuity and successful existence, they will need to place a greater focus on these
environmental factors. Therefore, recommendations of this study are based on the most
significant factors that influenced business sustainability of manufacturing SMEs in KZN.

Internal Factors

For manufacturing SMEs to be able to achieve business sustainability, they will have to
extensively analyse the firm’s strength and weaknesses. Here, they should be identifying exactly
their strongest points (such as responsiveness, excellent customer services, quality products,
resources, educated employees, location) and use them as a competitive strategy to achieve
business sustainable growth. A business has its own distinct characteristics and manufacturing
SMEs in KZN need to place value on those characteristic and use them optimally for their
business sustainability.

Capital and business performance: Manufacturing SMEs operate in a very congested yet
dynamic business environment, where capital and business performance is affected by many
factors. The study recommends that, manufacturing SMEs need to invest heavily on technology
and automation for manufacturing purposes and service delivery if they are to compete in local
and international markets. They further need to strengthen their business capital by inviting
potential shareholder/investors who are interested in making returns on investments. The study
further recommends that there is also a serious need for manufacturing SMEs in KZN to invest
properly on governance and control of these firms. This is to ensure proper usage of scarce
resources and enhancement of decision making amongst these firms.

Inadequate support from shareholders/boards of directors: Many manufacturing SMEs
seem to be lacking the influence that shareholders/boards of directors have, especially in big
organisations. The acquisition of shareholders/boards of directors has been lauded in large
organisations as a strategic instrument towards business sustainability and growth. The
inadequate support from shareholders/boards of directors can be attributed to manufacturing
SMEs inability to attract investors due to their instabilities on the market. It is therefore
recommended that manufacturing SMEs need to formulate firm governance and control policies
that are going to oversee the overall management and performance of the firm. The utilisation of
this document can be essential in fast tracking the irregularities within the firm and provide
corrective measures which can improve the stability of the firm. The stability of a business in
the market will increase its chances of attaining potential investors, which can foster and
promote business sustainable growth.

Inadequate business networking: Networking is seen to have an important positive
influence on business sustainability and growth for manufacturing SMEs. It is recommended that
manufacturing SMEs need to start pursuing potential business networks as they are very useful in
building a strong relationship with customers and suppliers and thus they help to provide
competitive advantage. The study encourages manufacturing SME leaders/managers to be more
dynamic and engage in business networks as they have the capability to support a firm to seize
opportunities, and to integrate knowledge use to exploit those opportunities including the
exchange of resources. Failure to strengthen business networks can pose serious challenges for
manufacturing SMEs, particularly their sustainable growth.

Employee support: Staff training and development provided on a yearly basis needs must
be seen by manufacturing SME leadership as a strategic tool to business sustainability and
growth. This is because professional development provides skills that will help employees
maintain and enhance the knowledge and skills needed to perform their jobs and this will also
positively improve staff influence on business operations. The study further recommends that
manufacturing SMEs need to begin hiring qualified workers to support the operations of the
business. On the off chance that this isn’t feasible, at that point, inside staff advancement ought
to be distinguished as a key arrangement for getting ready and prepping workers for certain
activity profiles inside the firm. This will improve employee influence and support towards the
realisation and attainment of business goals which has a positive influence on business
sustainability and growth.

External Factors

An awareness of social factors and a willingness to implement continuous technological
changes in line with external developments were identified by the empirical study as key factors
that affected business sustainability and growth. It is therefore important that leadership understands the wider business environment in order to produce and introduce products that are
needed and wanted by consumers which in turn will improve the sales figures and revenues
earned. Furthermore, it is recommended that manufacturing SMEs should keep up with current
technological trends.

Competition: Fierce competition breathes amongst small businesses particularly in KZN
and it requires businesses with resolute durability. One of the greatest and yet cheapest ways to
obtain competitive advantage is by revamping and innovating the internal processes to suit the
needs and expectations of the customers and potential customers. Competition can further be
obtained through the introduction of technology and automation. Although this innovation can
be problematic to some manufacturing SMEs due to insufficient resources, they are however
forced by competition to find ways to innovate if they are to maintain their sustainability and
keep any competitive advantage.

Fast changes in technology: Technology in the modern business has been seen as a
strategic tool for almost every operational activity that occurs within a firm. Leaders/managers of
manufacturing SMEs who fail to adopt and use technology set themselves for failure, due to
technology’s versatility and support that it injects to business operations. The need for
manufacturing SMEs to invest on viable technological advancements to be incorporated with the
firm is of great agency if their intentions are focused on sustaining the business.

Social factors: In order for manufacturing SMEs to be able to exploits the social factors,
they will need to start studying and understanding business trends and customer preferences and
their changes. By this, they will gain enough needed knowledge on how they can best cater for
their customers and potential customers and be more responsive to any changes on the market.
Therefore, it is further recommended that manufacturing SMEs need to establish working teams
that are going to be responsible for keeping track on any significant changes on customer
preferences and trends, and on niche markets. Manufacturing SMEs must be flexible enough to
accommodate any prominent beneficial change that may arise. This will not only broaden
customer base, but it will strengthen profit margins and maintain business sustainability and
growth of manufacturing SMEs.

Even though manufacturing SMEs play an essential socio-economic role in KZN, they are
clouded by serious challenges which they need to regularly combat by constantly formulating
strategies and models that are going to drive their vision pass all the predicaments that stand
before them.

Acknowledgements

The financial assistance of the National Institute for the Humanities and Social Sciences, in
collaboration with the South African Humanities Deans Association (SAHUDA) towards this
research is hereby acknowledged. Opinions expressed and conclusions arrived at are those of the
author and are not necessarily to be attributed to the NIHSS and SAHUDA.

My gratitude also goes to the NRF and the DUT for their financial support during the
course of this research.

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