Transcript Managers and their Entrepreneurs

Managers and their
Entrepreneurs:
Power and Authority in
indigenous Private
manufacturing firms in
nigeria
 Before 1990s, most business people
concentrated in trade not
manufacturing
 “industrial elite”: Today, more
wealthy indigenous moving into
medium to large manufacturing
 Are they capable of creating and
sustaining an industrial base for
nigeria?
 Study determines how
relationships between owners
and managers in private
manufacturing businesses
facilitate or handicap the
chances of survival of the firm
Profiles of
managers and owners
 Managers generally highly
literate
 Most College educated
 Many have multinational
business experience
owners
 generally have little formal
education
 Only a quarter have a college
education
 Education does not determine
level of success of an
entrepreneur
Power and authority
 Owners wield power over managers
and workers
 Power not based on expertise or
knowledge rather on who the
person is
 Managers have authority over
workers
 Authority based on position and
expertise
Sympathetic recruitment
of managers
 Two types of recruitment:
sympathetic and conventional
 Sympathetic: entrepreneurs
hiring unemployed managers to
help them out
 Conventional: based on
objective criteria related to
requirements of the position
Typical managers’
complaints of owners
 Lack of decision-making powers given
 Absent owners
 Positions filled by unqualified family
members
 Lack of trust in handling company
accounts
 Low salaries
 Dead-end jobs with no clear paths of
promotions
 company money used for personal
expenses
Managers
commitment to company
 Sense of obligation due to
sympathetic hiring despite
dissatisfaction
 Lack of opportunities
elsewhere
Problems facing
businesses
according to managers
 Inadequate operational
resources
 Financial problems due to
excessive borrowing and high
interest rates
 Unreliable supply chains
 Firm continuity: who will take
over business when owner dies
Managers’ suggestions
for enterprise durability
 Sell shares to public
 Decentralize and delegate
authority
 Provide more work resources
 Improve working conditions
Entrepreneurs’
mistrust of managers
 Resources used for personal
gain
 Fear that knowledge of
company operation and
strategy may be used against
them
 Culture of secrecy
Suggestions to improving
business success
 Importance of job rewards
 Post employment security (pension)
 Government legislation that
encourages or mandates firms to
build such security
 Recognition of mutual interests on
the part of owners and managers to
long term success of company
Trade and the politics
of informalization in
bissau, guinea-bissau
Roots of
informalization
 newly independent state
created socialist oriented
society
 People’s stores throughout
country collected agriculture
from peasants
 Prices fixed by state
problelms
 Not enough people’s stores to
supply all population
 Inefficiency and shortages of
goods widespread
 Eventual loss of Government
political and economic
credibility
Disengagement of
population
 Producers unwilling to
cooperate and sacrifice for the
state
 Producers evaded sales to
official outlets in favor of
selling at higher prices through
clandestine networks
Effect on government
 Deprived it of taxes and export
products
 Decline of foreign exchange
 Decline of domestic revenue
 Eventual rise of external debt
The urban elite
 State officials and employees in
state stores benefited from chronic
food scarcity
 Smuggling of goods in order to
charge high prices in black market
 Private fortunes amassed using
informal channels of circulation
and their privileged positions
Majority of the
population
 Forced to survive outside the
wage and state market system
 Petty trading as a way of
survival
 Government backlash against
informal economy
The informal boom in the
adjustment era
 Under pressure of donors the
informal sector was
decriminalized and considered
important to economy
 Liberization of economy
 Two sub-spheres within the
informal trade sector emerged:
accumulation and survival
Informalization
for Accumulation
 State bureaucratic class became
commercial bureaucratic class
 Enjoyed protection and access to
the state and formal institutions
 Ability to operate within the formal
and informal sector to its benenfit
Informalization
for survival
 Urban households rely heavily
on informal trade for income
 Trade of food items most
widespread
 Most are one-person
enterprises
 Beyond the control of
government
Problems
for most traders
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Inflation of prices in general
Most not able to save
Most income spent on food
Decreased scale of operation and
longer working hours
 Lower purchasing power of
customers
 High competition
 hostility towards informal traders
despite changes in official policy
from officials and large merchants
Trade credit in zimbabwe
 Important source of short-term
liquidity for business
 Terms comparable to those in
industrialized countries
 Large firm advantages: credit
for longer periods at lower
interest rates; more likely to be
offered cash discounts
Trade credit
approval based on
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Formal screening
Statistical discrimination
Reputation
Aquaintance
Trail bases for new customers
 Reputation effects are most
important for large firms
 Relationships are important to
medium and small firms
 Microenterprises typically have
neither
Problems facing african
firms
 found to be less likely to obtain
trade credit
 Disconnect between african
entrepreneurs and the white-andasian-dominated business community
(bankers and suppliers)
 Perceived as less reliable in loan
repayment
 Less well-connected and have few
acquaintances in banking and
business
Sources of finance
 Supplier credit: widely used by
all businesses
 Non-bank financial institutions
 Bank overdrafts
Providing trade credit
 Filling out credit application
form and provide bank
references
 For large firms reputation is
enough
 Having prior relationship with
supplier important for small
and microenterprices
Cash discounts
 Offered for early payment
 African firms less likely to
offer
 Used to entice early payment by
problematic customers
 Offered when cash is needed
Policy recommendations
 Credit delivery programs should
focus on teaching rules of business
to loan recipients
 Help entrepreneurs graduate into
medium size firms
 Create more opportunities for
business contacts between black
and white entrepreneurs
 Encourage established firms to
experiment with black
subcontractors