CHAPTER I

INTRODUCTION

Background of the Study

In the productive world, for any nation, Entrepreneurship is the core of productive

economic development and social progress as it acts as a positive force in economic growth

by serving as the bridge between innovation and market place. Sole proprietorship, as

they are popularly referred to can simply be stated as any legitimate business started by one

or more persons in any sector of the economy of any Nation. Though technical definitions

exist, they vary from country to country and from institution to institution. According to

Malibala 20l2 there is pride of ownership which generates personal motivation and

identification with the business. Combining energies and talents of the two or more

partners can be often be successful where one person alone would fail.

Small businesses irrefutably remain critical to the development of any nation’s

economy as they are an excellent, source of employment generation, help in development

of local technology, and develop indigenous entrepreneurs (Erdem and Erdem, 2011;

Alaye-Ogan, 2012). The importance of small businesses to the citizens’ standard of living

and the nation’s general growth cannot be overemphasized. Even co-existence of

large-scale industries is seen as dependent on healthy activities of small businesses (see

Fabayo, 2009). Most small businesses are managed by their owners because they could not

afford to hire expertise to run the businesses for them (Rajaram, 2008). Consequently,

small business owners perform so many operational tasks and management functions
themselves (Kirsten, 2013), which may often result in business failure (Ihua, 2009). The

independent and private ownership (sole proprietorship or partnership) of small business

always promote uncertainty (Keasey and Watson, 1993). Sole proprietorship is most

common and simplest form of business organization. Sole proprietorship is unofficial

because it is not subject to federal or state regulation, also it is relatively simple to manage

and control. In this type of business, one person that is the proprietor provides all the

capital required to carry on the business. A sole proprietorship is a company, which is not

registered with the state as a limited liability company or corporation. The owner does not

pay income tax separately for the company but he/she reports business income or losses on

his/individual income tax return.

Specifically, the main objectives of this study are (a) to examine the characteristics

of small businesses in selected barangays in Bacolod City namely (Estefania, Handuman,

and Sum-ag), (b) to critically evaluate the challenges and difficulties hampering the growth

and survival of small businesses in selected barangays in Bacolod City namely (Estefania,

Handuman, and Sum-ag), (c) to examine the government and individual efforts to support

the growth and survival of small businesses in selected barangays in Bacolod City

(Estefania, Handuman, and Sum-ag), and (d) to examine the causes of small businesses

short live in selected barangays in Bacolod City (Estefania, Handuman, and Sum-ag).

Another challenge of sole proprietors that can encounter are owner dependence, business

process and procedure, managing finances, human resource, quality and growth, and

attractive new business. Therefore, this study will be of immense benefits of existing small

business owners, and those who are nursing the ambition of operating small businesses of

their own in selected barangays in Bacolod City (Estefania, Handuman, and Sum-ag). In
addition, business researchers, academics, and the government will find it very useful in

their research, introduction and implementation of government policies. According to

Bowen, Morara & Mureithi (2009) it can be inferred that is sole proprietorships are

dominated by people with relatively low levels of education.

Statement of the Problem

This study aims to determine the challenges of sole proprietorship businesses in

selected Barangays (Estefania, Handumanan, and Sum-ag) in Bacolod City, Calendar year

2019.

Specifically, this study aims to answer the following questions:

1. What is the demographic profile of the respondents in terms of:

a. Age

b. Sex

c. Status

d. Educational Attainment

2. What are the challenges among sole proprietors in terms of:

a. Competencies

b. Financial Management
 c. Human Resource

d. Customers

e. Location of the Business

f. Registered and Non-registered

g. Length of Business

2. What is the level of challenges of sole proprietorship businesses according to age, sex,

status, educational attainment, in terms of competencies , financial management, human

resource, costumers, the location of their business , registered and non-registered and

length of business?

3. Is there a significant difference of the level of the challenges of sole proprietorship

businesses according to age, sex, status, educational attainment in terms of their

competencies, financial management, human resource, customers, location, registered and

non-registered and length of business?

Hypothesis

To advance the hypothesis will be formulated that there is no significant difference of

the level of challenges among sole proprietorship businesses in selected barangays

(Estefania, Handumanan, and Sum-ag) in Bacolod City on competencies, financial

management, human resource, customers , location, registered and non-registered and

length of business.

Theoretical Framework

The study is anchored to the theory of Resource-Based Theory, Survival-Base Theory,

dynamic capability innovative theory and ownership theory. The Resource-Base Theory

stems from the principle that the puissance of firms' competitive advantage lies in their

internal resources, as opposed to their positioning in the external environment. This theory

as a basis for the competitive advantage of a business lies primarily in the application of a

bundle of valuable tangible or intangible resources at the business disposal (Barney, 2001

cited in Ates and Bittici, 2009) introduce further that rather than simply evaluating

environmental opportunities and threats in conducting business, competitive advantage

depends on the unique resources and capabilities that a firm possesses. The resource base

view of the business predicts that certain types of resources owned and controlled by

businesses have the potential and promise to generate competitive advantage and

eventually superior Business performance (Ainuddin et al. 2007 cited in Abosede et al.

2016).

The Survival-Base Theory is the strategy that a business uses to avoid being eradicated

by competitors. One process- sensing, intuition, feeling, thinking- must be developed by

the owner in order to succeed in innovative and high intellectual and practical capacity to

run his company with bold jump and should be ready to accept the uncertainty (Gibcus,

2003 cited in Abosede et al. 2016). Basically, the underpinning of survival strategy is that
organization needs to continuously adapt to its competitive environment in order to

survive. Each decade seems to bring a new way of thinking about the business environment

(a paradigm) and new ways of acting (Brian, 1996 cited in Abosede et al. 2016).

Priem and Butler (2001) cited in Abosede et al. (2016) stressed that Resource-Base

Theory is essentially a static theory since it does not explain the evolution over time of the

resources and capabilities that form the basis of competitive advantage. Hence, it is not

enough to view a business as a bundle of resources, but note also the mechanisms by which

the businesses learn and accumulate new skills, new credentials, and the forces that limit

the ratio and direction of this process (Teece et al. 2004 cited in Abosede et al. 2016).

Dynamic capabilities as the business' ability to integrate, build, and reconfigure internal

and external competences to address rapidly changing environments, in this sense (Teece

et al. 1990 cited in Abosede et al. 2016). Indeed, innovation is considered a critical driver

of economic growth in the formulation of the endogenous growth theory (Abosede &

Onakoya, 2013 cited in Abosede et al. 2016).

The Ownership Theory explains that the ownership structure whether concentrated or

diffused ought to be influenced by the profit-maximizing interests. At the level of sole

proprietorship businesses the skills of the owner is critical to the long-term success and

survival of the business while the role of the capitalist is usually rambling at the corporate

level for large companies. Owner is the enterprise main strategist and decision maker,

developing the vision, mission and strategies, and also to administer them. However, the

role of the owner and his stance towards the different challenges are therefore often critical
for implementation of strategy. Besides, the personal goals, traits and strategic orientation

will have significant impact on enterprise strategy.

Conceptual framework

For better covenant and full comprehension, a paradigm of the key variables were

included and reflected in this study. The concept "sole proprietorship” deals with

unincorporated business that has just one owner who pays personal income tax on profits

earned from the business. Sole proprietorship can be regarded as setting the context for

owner's behavior, like the exploitation of opportunities (Ireland et al. 2001 cited in

Abosede et al. 2016). It concerns the utterance and implementation of the major goals and

initiatives taken by a sole proprietorship business top management oF the owners based

on consideration of resources and an assessment of the internal and external environments

in which the organization competes (Nag et al. 2007 cited in Abosede et al. 2016). More

importantly, a sole proprietor will serve as an overall direction to the Business and involves

indicating the business' objectives, developing policies and plans designed to achieve these

objectives, and then allocating resources to implement the plans. Academics and practicing

Owners have developed numerous models and frameworks to assist in The decision

making in the context of challenging environments and competitive dynamics (Ghemawat,

2002 cited in Abosede et al. 2016). More so, it assists businesses to make effective

decisions and strategies by staying alert to the threats and opportunities in an uncertain and

dynamic environment. The advancement analysis was supervised to identify its

relationship towards the variables competencies, customers, financial management, length

of business, location of business and whether it is registered or not to the government are
assumed to have influenced the consciousness on the Challenges among sole

proprietorship businesses in selected barangays (Estefania, Handumanan, and Sum-ag) in

Bacolod City . Wherefore, the utterance of sole proprietorship businesses challenges

involves analyzing the environment in which the business operates, then making of a series

of strategic decisions about how the enterprise will compete. However, formulation ends

with a series of goals or objectives and measures for the business to pursue.
Figure 1. Schematic Diagram of the Challenges among Sole Proprietorship Businesses in
Selected Barangays (Estefania, Handumanan and Sum-ag) in Bacolod City

Sole Proprietorship Businesses in Selected Baranggays

(Estefania, Handumanan and Sum-ag) in Bacolod City

Challenges

Age
Competencies
Younger
Financial Management
Older
Human Resource
Sex
Customer
Male

Location of the Business

Female

Civil Status Registered or

Non-registered
Single

Length of the Business

Married

Others

Educational Attainment
Significance of the Study

Sole Proprietors. The study will help sole proprietors to gain better insights and cope

up with the different challenges that they encounter in the run of their business.

Customers. The research will help customers to ensure the safety and cleanliness of

the foods.

Department of trade and industry (DTI). This study will provide information that

will be beneficial in terms of identifying the registered and unregistered sole proprietorship

businesses.

Future Researchers. The study will give relevant and useful information to the future

researchers in the conduct of similar studies in a wider scope.

Scope of the Study

This study focuses mainly on the challenges face by sole proprietors in Bacolod City.

The participants of the study were the selected Barangays such as Handumanan, Sum-ag,

and Estefania the year of 2017-2019. The study determine the challenges of the sole

proprietors of to what level of extent does it constitute to the challenges sole proprietors is

facing in terms of competencies, financial management, human resource, customers ,

location, registered and non-registered and length of business. This study is limited on the

actual data records of business performance that belongs to sole proprietorship business

mainly eateries on the selected barangays chosen at systematic random sampling. The

researcher will make a sample size of 30% from the list at random of the sole
proprietorship business in Bacolod City and then an element or sampling interval is

selected. The element can be arrived by getting the quotient of total population and sample

size. A researcher- maid questionnaire was used to gather data from the participants as the

basis for a proposed knowledge enhancement program of sole proprietors. This research

was conducted at the selected barangays namely: Handumanan, Sum-ag, and Estefania for

the period covered 2107-2019.

Definition of Terms

For an understandable content of the study, the following terms are ideal, conceptual

and operational:

Capital - money or wealth needed to produce goods and services (Oden, NA).

In this study, refers to the money a sole proprietor used in business processes.

Customer- an individual or business that purchase another company’s goods or

services (Bloomenthal, 2019).

In this study, it refers to the one of the beneficiary under the study.

Human Resource- company department charged with the finding, screening,

recruiting, and training job applicants, and administering employee-benefit programs

(Kenton, 2019).

- includes the workers, employees and the management of a sole proprietorship

business and how a sole proprietor handles its manpower.

 Financial Management- helps to determine the financial requirement of the business

concern and leads to take financial planning of the concern (Kileo, 2016).

In this study, it refers to one of the factor that constitute to the major challenge in the

performance of the sole proprietorship.

Sole proprietorship- referred to as a sole trader or a proprietorship is an

unincorporated business that has just one owner who pays personal income tax on profits

earned from the business (Twin, 2019).

In this study, it refers to the main beneficiary under the study.

CHAPTER II

Review of the Related Literature

This section will provide a brief literature review on the various factors that affect

the challenges of sole proprietorships performance, particularly in the context of

developing and emerging economics.

Finance Management

Finance is a major constraint facing of sole proprietorship and it can have a

considerable jolt on small business performances. Sole proprietorships do not, and are

typically not required, to have a detailed record and are classed as being “informational

opaque”. As such, sole proprietors are deemed to be a riskier prospect compare to their
large counterparts and tend to face higher premiums or onerous collateral requirements

from financial institutions (Ng et al., 2018).

External and government interventions into sole proprietorship businesses access to

finance to commonplace among developing countries. As Wang (2016) stated that small

and medium enterprises with connection to the state appears to have fewer financing

problems. Innovating lending strategies such as factoring, credit-scoring and leasing are

better alternatives for traditional debt practices in financing the business with the absence

of developed institutions (Bech and Demirgūç-Kunt, 2006). Thus, it is not only about

financing but the type of finance is also important to sole proprietorship businesses

performance particularly for a developing economies.

Human Resource

Human resource is another major factor that is often positively associated with the

business performance. Human resource development and occupational health and safety

had a direct relationship with the non-financial performance of sole proprietorship

businesses, whereas manpower performance management and non-financial performance

translated into better financial performance for a small proprietorship businesses

(Ogunyomi and Bruning 2015). There are studies about small businesses shows that there

is a sure gap between on the performances of the small businesses. Most studies tend to

focus on specific few variables as determinants of a small business performance.

 Our research will fill the gap and add value as we offer a more comprehensive

approach to determine the derivers of sole proprietorship businesses referred to as small

businesses performance in emerging and developing economies.

CHAPTER III

RESEARCH METHODOLOGY

This chapter presents the research design, locale of the study, and the respondents

of the study. The purpose of this study is to determine the challenges of sole

proprietorship business among selected barangays in Bacolod City.

The Research Design

The descriptive survey-method research will be used in this study. A survey was

used to gather the information of the respondents who were selected from a specific

populations. It also involved a structured interview to identify their reasons in engaging

in sole proprietorship type of business. According to McNeill (2018), descriptive research

is of course, to describe, as well as explain, or validate some sort of hypothesis or

objective when it comes to a specific group of people.

Survey is a popular method and common strategy in business research. The

Survey Method allows the collection of a large amount of data from a large

population. A survey allows for standardization of data which allows easy comparisons.
Locale of the Study

The study will be conducted in a specific population in Bacolod City, Negros

Occidental; Barangays: Estefania, Handumanan and Sum-ag.

Respondents of the Study

The respondents of the study will be the sole proprietors in a particular place in

Bacolod City, namely; Barangays: Estefania, Handumanan and Sum-ag. They will be

selected through purposive sampling.

According to Foley (2018), purposive sampling, also known as judgmental, selective,

or subjective sampling, is a form of non-probability sampling in which researchers rely

on their own judgment when choosing members of the population to participate in their

study. This sampling method requires researchers to have prior knowledge about the

purpose of their studies so that they can properly choose and approach eligible

participants.

In this case, the researcher selected number of participants of 90 of the total sole

proprietors in the selected barangays of Bacolod City. These respondents will be given

questionnaires to accomplish and to response in which the researcher find these

respondents who can and are willing to provide the information by their experiences.

Table 1 shows the distributions of the respondents from the different sole proprietors in

selected barangays in Bacolod City, Negros Occidental.

 Table 1

Distribution of Respondents from Sole Proprietors in selected barangays in Bacolod City,

Negros Occidental

Areas Number of Respondents

Estefania 22

Handumanan 45

Sum-ag 23

Total 90

Research Instrument

The research instrument was a self-made questionnaire formulated by the researchers.

This study utilized the researchers self-made questionnaire to secure relevant information

effectively. The questionnaire was organized into two parts.

Part I, will be consisting of the demographic profile of the respondents which include:

the personal attributes such as name, age, sex, civil status and educational attainment.

Part II, was composed of questions centered on the level of challenges among sole

proprietorship business in selected barangays in Bacolod City. The questionnaire is

answerable with the five point scale: (5) very high, (4) high, (3) moderate, (2) low, and (1)

very low.

Validity of the Instrument

Validity is foremost on the mind of those developing measures and that genuine

scientific measurement is foremost in the minds of those who seek valid outcomes from

assessment ( Bond, 2003, p. 179).

In this study, the researcher self-made questionnaire was subjected to the content of

validation by the experts in the field of research, Trade and Industry, as well as in Business

and Management to look at the content and format of the questionnaire and judge whether

or not they are appropriate.

Furthermore, the research instrument obtained the average score of ____ which is

interpreted as very highly practiced that the questionnaire was valid for this study.

Reliability of the Instrument

Reliability, is a consistency across time (test-retest reliability), across items

(internal consistency), and across researchers (inter-rater reliability).

To establish the reliability of the research instrument we conducted 90 personnel in

the specific places. After the questionnaire was gathered, the responses were tallied and

coded, using SPSS.

 Furthermore, the test of reliability instrument was established by determining the

value of Cronbach’s (alpha) reliability test, the result yielded a score of 0.90: therefore, the

research instruent was reliable.

Data Gathering Procedure

After the researchers established the validity and the reliability of the instrument,

approval will be asked from the proper authorities of Estefania, Handumanan and Sum-ag

Barangay Halls will be secured and the researchers conducted the two-time administration

to the 90 respondents of Estefania, Handumanan and Sum-ag will be, to determine the

prevalent factors affecting administrative services. There were sufficient copies of

questionnaires that were reproduced and distributed to the participants. A one-day schedule

of administration will be allotted.

The researchers will personally be administering the questionnaires and requesting

the participants to answer the items in the survey-questionnaire.

Data Gathering Process

After the researchers established the validity and the reliability of the instrument,

approval will be asked from the proper authorities before the conduct of the study.

In problem number one is to identify the profile of the respondents according to name,

age, sex, civil status and educational attainment. Frequency and percentage distribution

will be used.
 For problem number two is to determine the prevalent challenges among sole

proprietorship in selected barangays in Bacolod City. Mean score will be used and

interpreted using the following.

Mean Score Interpratation

4.21 – 5.00 Very Highly Practiced

3.41 – 4.20 Highly Practiced

2.61 – 3.40 Moderate Practiced

1.81 – 2.60 Low Practiced

1.00 – 1.80 Very Low Pracriced