Entrepreneurial Business Models for Small and Medium Enterprises (SMEs) from a Perspective of SMEs’ Informal Sector in Zambia

Abstract

Entrepreneurship and innovation sustainability among small and medium enterprises (SMEs) draws worldwide attention because of the significance of the SMEs in economic development metrics, such as employment creation. However, factors that are attributed for the hindrance of sustainability and entrepreneurial capacity among SMEs remain varied and an open question in both practice and theory. Similarly, though there are possible business models to attain sustainability suggested in theory, these too are varied and remain an open question. This is even more pronounced in developing countries like Zambia. The objective of this study was twofold: to identify the internal and external factors that hinder business growth and sustainability of SME’s in the informal sector, and also to propose a model for business growth and sustainability for SMEs. The study adopted a descriptive mixed method approach by the use of both qualitative and quantitative methods. Respondents were selected using convenience sampling, and data collection from 100 SME’s selected from 10 markets in Lusaka, Zambia, was by using questionnaires, face-to-face interviews and observations. Findings indicate that there are a number of both internal and external factors that hinder business growth and sustainability of SME’s in the informal sectors of retailing and metal fabrication in Lusaka, Zambia. Identified factors included lack of innovation and creativity; lack of a succession plan; lack of consistency and endurance; desire to grow the business fast without due considerations; high interest rates for loans; and lack of access to source capital and poor management of the SME’s. The study proposed Business Models based on Stochastic Modelling; and Perren’s Framework of Micro Enterprises Model, i.e. Deterministic Approach Model, and the 3P’s of sustainability Model of SME’s to make SME’s business strategy more sustainable and profitable. These proposed models and approaches have potential to lessen the many challenges facing the SMEs which are a mixture of both internal and external factors.