MBA Research Project-Final

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MBA Research Project-Final

MBA Research Project-Final

Abstract

The purpose of the present research was to analyze the factors coursing entrepreneurial business success upon financial planning with special reference to small and medium scale enterprises in Sri Lanka. 

This is an explorative research study by its type.  Hence deductive approach was used to collect view of respondents. Present research was done within the perspective of entrepreneurship and business success. Respondents were selected using stratified random sampling method from small and medium scale entrepreneurs in different districts. 

Research findings revealed that medium scale entrepreneurs use financial planning effectively as compared to small scale category hence demonstrate comparatively business success in their businesses than the small scale category. It was revealed that all capital budgets, financial budgets, cash flow and working capital management are similarly important in achieving business success in small and medium scale enterprises.

CHAPTER ONE

1. Introduction

Entrepreneurship development and enterprise promotion, SME development has become key concepts in today’s context in any country when focusing economic development. Entrepreneurship motivates the inner potentials of people   who are interested in doing business, making them committed in achieving their aspirations and adding many things in to the society. Entrepreneurs are the catalyst who can lead the change in providing positive up terns for economy.  Entrepreneurship development has a key significance since it is vital for economic development in any country. Therefore irrespective of the country size, developed, under developed or developing economy, the concept of entrepreneurship development has an important attention everywhere. Entrepreneurs, as the leaders of the small and medium scale enterprises are contributing towards the country’s development in strengthening the economy in different directions.

SME sector has been introduced to Sri Lanka as a vibrant and dynamic sector of the economy for development. The sector has mainly been emerged with the commencement of the open economy in the country and continued to grow with the economic rehabilitation initiatives of various governments up to now. Currently the sector is in a threshold of getting a huge up tern with the resolution of the ethnic conflict and its positive impacts at various levels. The responsibility that the sector should hold is significant with the avenues open with the peace in the country.  Small and medium scale business activities have been identified as one of the main driving forces of any economy in providing powerful foundation of economic sustainability. It is well recognized fact that dynamic SME sector holds the key to economic prosperity in a country like Sri Lanka through following importance

1. Provide increased employment
2. Easy to start
3. Need small/ local market
4. Encourage growth of rural entrepreneurship
5. Foster diversification of economic activities
6. Influence the standard of living of people

SME sector has acquired a prominent role in the socio-economic development in the country.

 “In 1970s and 80s the situation changed and SMEs became very momentous part in an economy. They played a critical role in generating new employment, economic growth, and innovation, competition and poverty reduction (Stokes 2003: and Prasad 2004). According to the International Finance Corporation (2006), SME contribution to the Gross Domestic Product (GDP) and the employment has been gradually increasing. Also SMEs increased their resource and exports from the liberalized economic policies and foreign direct investments (Raynard and Forstater 2002).”

The last year (2011) budget shows how the government is interested in developing the sector aiming at various short and long term objectives. It clearly brought out different plans of the government to promote and develop SME sector in order to create a sustainable economy for the country’s future.

“Expanded roles for foreign direct investment and public-private partnerships are critical elements of the Government of Sri Lanka’s (the Government) development agenda. The narrowing fiscal space is prompting growing reliance on the private sector for investments and service delivery.

The Government is cognizant that a well-functioning small and medium enterprise (SME) sector could take the lead in generating jobs and economic growth while raising income levels for a large segment of the population. Since regional SMEs (i.e., SMEs

Outside the western province) comprises 75% of the total number of registered SMEs in the country, the Government recognizes the importance of SMEs in equitable regional growth. However, regional SMEs have not realized their full potential for contributing to economic growth and employment generation. Accordingly, regional SME development is one of the key elements of the Government’s strategy for reducing regional inequalities in its 10-year (2006–2016) National Development Strategy”

 Mahinda Chintana: Vision for New Sri Lanka

1. Back ground of the research

Though the importance of entrepreneurship and SMEs have been identified and recognized, and the development and promotional initiatives are been taken by various private and public sector organizations, entrepreneurial skills, behaviors and impacts are questionable to a certain extent.  It has been identified by several studies that entrepreneurs face lot of troubles in sustaining their businesses in the long run. 60% of the businesses are closed down in Sri Lanka during the first 3 years after commencement. According to the records, when the situation is evaluated for a five year period, 85% of businesses which are closed down. 10% of the businesses remain unchanged without any improvement or growth. Only 5% of entrepreneurs will be successful in improving their businesses during the period of five years.  

It shows that many of the entrepreneurs entering in to the market have some sort deficiencies of skills and competencies or understanding some of the important aspects of business operations.  It is vital to see what the important elements in entrepreneurial skills and practices that brings success to the businesses. Since the government of Sri Lanka is in the process of assisting the SMEs creating supportive background for them to come up, the entrepreneurs should be developed in such a way that they can capitalize the situation  for their and the country’s devel……………………

MBA Research Project-Final