CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND TO THE STUDY

Small and Medium Enterprises (SMEs), new or existing, often face certain challenges when they approach products providers for both enterprise fixed capital investment and market standards. The insufficient supply of microloans is a major issue, particularly where business creators are unemployed persons, women or form part of ethnic minorities with different cultural dependencies. Supporting the supply of microloans is therefore not only an issue of entrepreneurship and economic growth, but also of social inclusion.

Nigeria has been in the constant wheel of fighting for liberalization of market in the African’s sister countries. This gave to the country the political power but remaining behind economic development (NSGRP, 2017). Further, it was reported that there are more than 1.7 million SME projects in Nigeria that employed more than 3 million people, which represent 20% of labor force in Nigeria, where SMEs are vital engines for the economy growth and play a great role for gross domestic product of Nigeria (NSGRP, 2017).

Deakins (2009) agreed that there are quiet numbers of potential reasons why firms and organizations merge together to form a partnership or joint venture businesses.

A joint venture is a procedure used to respond to specific business phenomena such as access to new markets, specificgovernment policy, business capacity, technology transfer or economies of scale. An international joint venture is aseparate legal organisational entity representing the partial holdings of two or more parent firms, in which theheadquarters of at least one is located outside the country of operation of the joint venture. The feasibility and the desirability of a joint venture must be assembled by careful analysis of the economic, political, social and cultural environment within which the venture will be implemented and managed.

A joint venture (JV) is a business agreement in which the parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets. There are other types of companies such as JV limited by guarantee, joint ventures limited by guarantee with partners holding shares.

Companies typically pursue joint ventures for one of four reasons: to gain faster entry into a new market; to acquire expertise; to increase production scale, efficiencies, or coverage; or to expand business development by gaining access to distributor networks.

On the other side, A partnership business is an arrangement where parties, known as partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations. It is also an association of two or more persons to carry on as co-owners of a business for profit. Partnerships are sometimes used in small retail, service, or manufacturing companies. It is fairly easy to form, and they are form simply by a verbal agreement, or more formally, by written agreement.

Setting up a joint venture/partnership business among small scale business owners normally represent a major and mind blowing changes to the business. However beneficial it may be to growth of the business, it needs to fit with the overall business strategy before committing to such joint venture business due to the challenges involved in it setting up, as both partners may need to critically decide better ways to achieve the partnership aims and objectives, comparing and learning from the success of other business combination from small scale business owners, and also trying to identify exceptional skills and expertise applied to the partners.

Whereas, most downfall of partnership business emerging through the merging of two or more small scale business owner can be evaluated when the partners fails to consider performing a SWOT (strengths, weaknesses, opportunities and threats) analysis to discover whether the two businesses are a good fit, not taking into account of partners employees’ attitudes bearing in mind that people can feel threatened by a joint venture, and partners having a different way of doing things in the course of their business and personal relationship, and this invariably affect the business working relationship, and causes decrease in profit generation of the partners or co-venturers.

Finally, In anticipation of the evaluation of the concept of partnership/joint venture phrase, which has almost been talked about and documented over the past (decades), it is extra-ordinary that this subject has been given in research studies, regardless of the fact that partnership business has been given fewer research studies and it has been part of the society for a longtime, though the motivation for partnership business dealings are usually built around some factor which include the desire to increase profit generation, access to international market, access to bank loans and grants, and opportunities surrounding it establishment.

It is against this backdrop that this study seeks to examine and evasluate the problems and prospect of partnership and joint venture business among small scale business in Nigeria.