AFRICA UNIVERSITY

(A United Methodist-Related Institution)

AN ANALYSIS OF THE DIVERSIFICATION STRATEGIES OF SMALL TO MEDIUM

SCALE TIMBER INDUSTRIES IN THE PROVINCE OF MANICALAND IN
ZIMBABWE

BY

181327
181294
170854
170949

2018
1.1 Introduction
At its best the timber industry in Zimbabwe was adequately catering for the timber needs of
the SADC region. The demand for Zimbabwean timber was high as the product was of a high
quality and reasonable price. There was however a sudden shift in the Zimbabwe economy
after the year 2000 which affected the timber industry. The major players in the industry were
affected by land invasions in their estates and the hyperinflation which reached over a million
percent. The unstable economic environment gave birth to Small to Medium Enterprises
(SMEs) in the timber industries. These small players also faced economic challenges and were
left with no option but to diversify for survival. The fight to find a diversification strategy by
SMEs motivated us to carry out a research study to analyse the diversification options available
for the SMEs in the timber industry. This chapter discusses the background to the study, the
research problem, purpose and objectives of the study, research questions, definition of terms
and the delimitations of the study.

1.2 Background to the study

There is no single universally agreed definition of SME as no single definition can capture all
the scopes of SME nor can be expected to reflect the difference between entities in different
industrial sectors or countries at different levels of development. Zindiya (2012) argues that
most definitions are based on size, number of employees, financial position or annual turnover.
In Zimbabwe Small Enterprises Development Corporation [SEDCO] (2010) defines SME as
a firm that employs less than hundred employees and maximum annual sales turnover of
US$830 000. Government of Zimbabwe [GoZ] (2000) defines a small enterprise as one that
employs not more than 50 people and acting as a registered entity, medium enterprises as firms
employing between 75 and 100 people. The Zimbabwe Revenue Authority (ZIMRA) has its
own definition for tax purposes and it defines SMEs in terms of employment, turnover and
asset base.

The significance of the SMEs sector is different throughout the world as it varies from country
to country in accordance with the level of development, pattern and rate of change in economic
development (Kennedy & Hobohm 2012). The importance of SMEs in economic development
came to light following the success stories of some East Asian and Western European countries
such as Singapore, Taiwan, North Korea, Germany and Italy. A number of donor agencies and
development analysts have called for intensive research in the role of SMEs in industrial and
economic development (Havenga, 2010). After the failure of large companies to generate
meaningful employment and industrial development, most governments in Africa have turned
to SMEs as a solution. The SME sector is now regarded as a solution to most developmental
problems in developing countries (Sibanda, 2012). According to Goriwondo (2011), SMEs
play a crucial role in the development of an economy as creators of employment and reducers
of poverty.

The SMEs contribution to the major economic activities will help address the economic
challenges in the country and improve their livelihoods. SMEs play a very important role in
the growth and development of any nation. Sharma (2011) states that the low income generated
in a large number of SMEs is dispersed more widely in the community than the large income
generated in a few large companies as the income benefit is derived by a large population while
large enterprises encourage more concentration of economic power. SMEs foster
entrepreneurship and does not demand high capital or high technology but only require
management skills and knowledge to mature the business to big giants in the nation. Battersby
(2012) outlined the pivotal roles of SMEs in any country.

The small to medium scale enterprises (SMEs) are the cornerstone for development of any
developing country because they provide a good ground for invention and the platform
for the practical application of appropriate technology in the production of goods and
services (Anyanga & Nyamita, 2016). In both developing and developed nations, SMEs
predominate the economy, creating 70% of employment opportunities and promote indigenous
technology (Ogundele, Akingbade, Saka, Elegunde & Aliu, 2013). According to Mwenje
(2016), over the past years the small to medium scale timber industries (SMEs) in Zimbabwe
have been characterized by the closure of some of their operations. This was a result of harsh
economic conditions in the country, shortage of raw materials, obsolete equipment and lack of
re-capitalization. This has caused a mismatch between business viability and business
opportunities, leading to small medium scale timber industry to collapse. Small to medium
scale timber industries collapse especially during the time of recession. They fail to diversify
both their industry and products and services during these hard times. The shortage of raw
timber (saw logs) supply and availability is one of the reasons why small to medium scale
timber industries fail to keep afloat or remain in business. The operational environment for
SMEs in the timber industry in Zimbabwe has been characterized by:
  loss of market share
 Shrinkage
 Stagnation
 Shut downs
 Marginal performances for those who remain in business long term.

According to Ogundele, Akingbade, Saka, Elegunde & Aliu (2013), a company can
systematically identify new business opportunities by using its marketing systems framework
to gain high market share, high productivity and gain more profit and attract more
customers. A business can consider ways of integrating forward, backward or horizontally, in
order to search for profitable opportunities outside its current business. Small to medium scale
medium timber industries may fail to consider appropriate strategies for their survival.
The advantages of enhancing such a strategy, according to the Business Development Bank of
Canada (2015) are as follows:
 Spreading risks
 Increasing the financial base of the organization
 Acquisition of new skills, hence the importation of new ideas into the organization.
 Higher confidence of endeavoring in new future business prospects for entrepreneurs.
The organization that employs such a strategy would enjoy economies of scale, innovation and
also commands a huge market share.

1.1 Problem Statement

Despite the high demand for timber products and the advantages achieved through
specialization in product quality and customer responsiveness, the performance of the small to
medium scale timber industry in Zimbabwe is declining.

1.3 Objectives
I. To determine the diversification strategies used by small to medium scale timber
industries in Manicaland.
II. To establish the effectiveness on growth of diversification strategies used by small to
medium scale timber industries in Manicaland.
III. To establish the relationship between diversification strategies used and performance
of the small to medium scale timber industries in Manicaland.
IV. To propose ways in which the small to medium scale timber industries may grow.

1.2 Research Questions

1.3.1 What diversification strategies are currently used by small to medium scale timber
industries in Manicaland?
1.3.2 How effective are the diversification strategies on growth of the small to medium scale
timber industries in Manicaland?
1.3.3 What is the relationship between diversification strategies used and the performance of
small to medium scale timber industry in Manicaland?
1.3.4 In which ways can small to medium scale industries grow?

1.4 Significance of the Study

The research will have the following benefits:
1.4.1 The upcoming entrepreneurs will be enabled to better understand the importance of
adopting the right diversification strategies and be conversant with best practices in
regards to business growth and profit sustainability.
1.4.2 It will help unsuccessful small business enterprises to take off and also new SMEs
to succeed while existing ones to even grow bigger.
1.4.3 Artisans will gain understanding on the strategic issues they need to address in
order to position them more competitively.
1.4.4 The government would get an insight into the strategy dilemma faced by small timber
industry. This would assist the government to consider support programs and growth strategies
for SMEs as this will be crucial in developing appropriate intervention policy that could bail
out the industry.
1.4.5 The government may use the finding as a policy framework within which this
sector can be enhanced to create more employment opportunities.
1.4.6 Investors would benefit from the information and have knowledge which they can use for
financial investment decisions when partnering with small scale timber producers.
1.4.7 The data collected can be used by the industry as data base for the various small scale
producers in Manicaland Region and their challenges and any possible opportunities and areas
of improvement.

1.5 Definition of Terms

Diversification – This means moving into totally different lines of business – perhaps entirely
unfamiliar products, markets, or even levels in production or marketing system.
Strategy – This is the managerial process of developing and maintaining a match between an
organization’s resources and its market opportunities.
Performance – Actual results that are achieved compared to the targets set for the period under
review
Timber Industry – This refers to a group companies that are in the business of processing
timber (saw logs) and manufacturing of timber products.
Market share – It is the percentage of market that an organization employs out of total growth.

1.6 Delimitations of the Study

 The research covers 3 out of 12 small to medium scale timber industries in Manicaland.
Bush saw mills are not included because of their nomadic status and the fact that they
lack continuity in terms of operating as businesses.
 The period covered by this research would be from 2012 to 2017.
CHAPTER III

RESEARCH METHODOLOGY

3.1 Introduction

This chapter discusses the research methodology that the researcher is going to use to carry out
the study. The topic under research is an analysis of diversification strategies for Small to
Medium Enterprises in timber industries in Manicaland (2012-2017). This chapter explicates
the research methodology that would be used in this study to obtain, organise and analyse
research generated data. The chapter also illuminates the research paradigm, research design,
sampling procedure and data collection instrument which will be used as well as how data
analysis will be carried out. This chapter also explains the validity, reliability and ethical
considerations which guides the researcher during and after fieldwork.

3.2 Research design

Maree (2007) defines a research design as a plan and structure of investigation used to obtain
evidence to answer research questions. Bryman (2012) further describes research design as the
one that provides a framework for the collection and analysis of data. Thus the research design
is a framework which brings together the theoretical aspects of a study and translates them into
practical steps which can lead to the achievement of the research aim. The research design
helps to answer questions pertaining to who, where and how concerning the study site, setting,
data collection instruments, procedure, sample and data analysis framework (Berg, 2001). This
study used the cross sectional descriptive survey research design that triangulates both
qualitative and quantitative data collection methods. According to Hall (2008) a cross sectional
descriptive survey research design collects data to make an inference about a population of
interest at one point in time. Cross sectional descriptive surveys are aimed at determining the
frequency or level of a particular attribute such as land rights in a defined population at a
particular point in time.

3.2.1 Quantitative study

Bryman (2012) defines quantitative methodology as a research strategy that emphasizes

quantification of responses of the participants in the collection and analysis of data.
Quantitative data is often generated by instruments such as questionnaires.

3.2.2 Qualitative study

Anderson and Ausenault (2001) define qualitative research methodology as a form inquiry that
explores social phenomenon in their natural setting and uses multi-methods to understand,
explain, interpret and bring meaning to them. Babbie & Mouton (2001) argue that qualitative
methodology involves a holistic inquiry and often carried out in a natural setting. The
qualitative approach emphasizes words rather than quantification in the collection and analysis
of data.

In this research, the researcher adopts both the qualitative and quantitative methodologies. The
study uses qualitative methodology to complement quantitative data generated through
questionnaires. Combining quantitative and qualitative data collection techniques ensure that
the participation of all relevant stakeholders will be realised.

3.3 Population

Jankowicz (1984) defines a population as a complete set of people, occurrence or objects from
which a sample will be drawn. Asika (2000) defines the population of a research as “all
conceivable elements, subjects or observations relating to a particular phenomenon of interest
to the researcher”. A research population according to Ghauri and Gronhaug (2005) relates to
the total universe of units from which the sample is to be selected.

In this study the population would be composed of twelve small to medium size timber
industries in Manicaland. This would cover the whole province with Mutare, Nyanga and
Chimanimani districts hosting the largest number. The above population would be justified
because it represents the register and stable small to medium size timber industries in
Manicaland.
In this study, the research population would be the workers of the three small to medium size
timber industries which include production workers, supervisors and senior management.
Ghauri and Gronhang (2005) define population as a total universe of the units from which the
sample is selected.

The first category of the population would be 50 production workers. These would be ground
floor workers who would be involved in the cutting and processing of saw logs into timber.
These would be chosen because these are in touch with everyday activities and happenings in
the cutting and processing plant.

The second category or group would have 15 supervisors. These would be assumed to be the
men in charge of production planning and supervision and in charge of the day-to-day running
of the factories. They are assumed to have forestry and wood technology certificate, diplomas
and degrees. Supervision courses are also assumed to have been attended.

The third category would be of 12 managers of the three small to medium size timber industries.
These would be chosen because of their role as the strategic thinkers of the companies. They
are assumed to be involved in coming-up with the strategic management process for the 3 small
to medium timber industries. These would be assumed to have certificates, diplomas or degrees
in Management.

3.4 Sample and Sampling procedures

Bless & Higson-Smith (2000) define a sample as “a sub-set of a population which must have
properties which make it representative of the whole”. Similarly, Bryman and Bell (2003) refer
to samples as the population that is selected for investigation. Samples involve collecting
information from a portion of the larger group, and on this basis, infer something about the
larger group (population). A representative sample is crucial to quantitative research and must
reflect the population accurately so that inferences can be drawn. Shaughnessy & Zechmeister
(1997) argue that the ability to generalize from a sample of the population depends critically
on the representativeness of the sample; otherwise, the sample becomes biased.

The researcher would use quota sampling in selecting the enterprises and stratified sampling
procedures to get the sample of employees of the three small to medium scale timber industries.
According to Mugenda & Mugenda (2003) stratified sampling is recommended when studying
a heterogeneous population since it ensures that each segment of the population is represented
and that population attributes and characteristics within a stratum are adequately and
representatively captured in the sample. This means that, elements could be selected from each
stratum by a random procedure. The population from which the sample would be drawn will
be seventy seven (77) in the 3 small to medium size timber enterprises. A sample will be taken.
The composition of the final sample is given on table 3.1 below.

Table 3.1: The Composition of population and sample (N = 77)

Category Abbreviation Population % Sample %

Managers MG 12 16 3 15
Supervisors SP 15 19 4 20
Production workers PW 50 65 13 65
TOTAL 77 100 20 100

Random sampling will be applied to each of the three strata. The population would write their
names on equal pieces of paper. The papers would be put in three hats and would randomly
pick the numbers. Those picked become the participants in this research. In each case, if a card
would be picked twice or thrice it would be returned into the hat, mixed thoroughly and the
process repeated. This will ensure that, each member had an equal chance of being selected.
Thus the sample would be composed of 16% (3 out of 20) managers, 19% (4 out of 20)
supervisors and 65% (13 out of 20) production workers.

3.5 Research Instruments

In order to get much required data, the researcher will use a questionnaire, personal and
telephone interviews and observation, to collect data. The researcher will also read the
documents of the 3 small to medium scale timber enterprises.

3.5.1 Questionnaire

The questionnaire would be employed in this study in which data would be collected by means
of a written survey. The questionnaire has the advantage that, the same types of items included
on the questionnaires will also be used as interview questions. The questionnaire encourages
the respondent to want to cooperate and to trust that answers will be treated with confidentiality,
stimulates responses through greater introspection, plumbing of memory or reference to
records, give instructions as to what is wanted and the manner of responding and finally
questionnaire identifies what needs to be known to classify and verify the interview. Two types
of questionnaires would be used in the data collection stage. One questionnaire would be for
the general gathering of fact (G.G.F). Questions would gather data on the use of diversification
strategies in small to medium timber enterprises.

The second set of questions would be concerned with the assessment of the effects of
diversification. The questions will address the main objective of the study. The questionnaire
would be structured in such a way that, it will use liker-to-scale which measures the intensity
of the effect. The use of the scale will make it possible to ensure quantifiability and efficient
analysis of data. The trends from responses would be easily picked out and this would
formulate a platform for problem solving. Open ended questions will be used.

3.5.2 Interview

To this study, this definition encompasses all the questions or type of questions that would be
posed by the interviewer to the respondents such as, structured or unstructured questions and
ranging along one dimension, basically on the diversification and their impact on the market
growth of small to medium scale timber industry.

Since the researcher will not only rely on information from the questionnaires, he also thought
of conducting some personal interviews with some of the production workers, supervisors and
managers, who were the members of the strata. Highly structured and standardized questions
would be used in data collection. The researcher (interviewer) would write a list of questions
(interview schedule) to which answers would be looked for. The respondents would be
interviewed on a face to face basis and also by telephone. Each interview would take about
twenty five minutes.

The interviews may take a week to complete. Interviews may pose problems as respondents
may not cooperate and give relevant answers. Bias is also a problem in respondents associated
with interviews. To solve the above problems, the researcher would make preparatory training
to the interview or research assistance. Standardized oral instructions will be issued to ensure
that the field investigators administers the instrument in the same way. More than twenty (20)
respondents would be interviewed including some repetitions for verification. Some interviews
will not be done on a face to face basis, but through the telephone. The same questions as for
the face to face interview would be asked and interviews to be completed in one day.

3.5.3. Observation
In this study, the researcher would observe and record information from people. The researcher
would have a chance to record behavior as it occurs and not rely on people’s memories and
previous reports. This instrument would be used by the researcher, so as to complement data
collected through the use of questionnaire and interviews.

3.5.4 Use of organization documents

In this study, the researcher would use written papers, reports in their entirety such as; journals,
articles, technical papers and illustrations. The secondary data would be obtained from annual
reports, audit reports, magazines and software operating meeting. The documentary data would
complement the primary data from the questionnaire, interview and observation.

3.5.5 Pilot Testing

Pre-testing of instruments would be done to eliminate problems before the full scale research
begins. The instruments would be given to the chosen pretest candidate who would be similar
in all important aspects with the actual respondents. After the corrections are made and the
researcher satisfied, the instruments would be hand delivered to the various subjects under
study.

3.6 Data Collection Procedures

The collection of reliable data is the most difficult, at least the most worrisome and time
consuming part of conducting a research. The researcher would require support of the Directors
of the companies who through their letters assures the respondents of the confidentiality of
their responses. The heads of departments would also assist the researchers by allowing him to
carry out the research in their departments. The two questionnaires, one on fact gathering and
the other on effect assessment would be hand delivered to the subjects. Interviews would be
carried out as per the interview guide. Documents would be read for the secondary data. All
the interviews would be completed within this period. Observations would be recorded on a
data collection form, with the researcher ticking “yes” or “no” to each respective item observed.

3.7 Ethical Considerations

Speziale & Carpenter (2003) note that ethical considerations focus on the moral obligations of
the researcher to respect and protect the rights of the participants who are expected to provide
knowledge or vital information in a study. The ethical considerations which are of essence to
this study include informed consent, confidentiality, anonymity, privacy, dissemination of
results and the right of the participants to withdraw from the study. To gain the consent of the
participants the researcher will enter into written agreements whereby they (participants) will
be made to sign consent forms to signal their acceptance to participate in the study.
Confidentiality and anonymity will be observed in this study by attaching codes and
pseudonyms to the participants and the information that they give. The researcher also pledges
to disseminate the research findings to all the relevant stakeholders particularly the study
participants after assessment by Africa University. Participants will also be informed that they
have the right to withdraw from the study whenever they feel that they could no longer be in a
position to participate in the investigation.

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