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Available online at www.internationalscholarsjournals.org © International Scholars Journals 

 

 
 

Full Length Research Paper 
 

Environmental audit behaviour, decision pattern, and 
market performance of small and medium 

enterprises in Nigeria 

 
Eseroghene Franklin Udjo 

 
Department of Business Administration, Al-Faisal University, Prince Sultan College of Tourism and Business, 

Abha-Saudi Arabia. E-mail: udjo.ese@pscabha.edu.sa. Tel: +9667231800 (Ext.324), +966562088801. 
 

Accepted 20 June, 2013 
 

The environmental audit behaviour and decision making pattern of Nigerian SMEs is obscure. Given the 
fact that the Nigerian business environment is turbulent, the study finds out whether the decision 
making process of Nigerian SMEs is contingent upon information from the business environment. The 
study, utilizing correlation statistical procedure examines the subject of discourse. The results of the 
study suggest that the analysis of technological, customer and competitive factors have partial effect 
on the market share of Nigerian SMEs. Conversely, the analysis of socio-cultural factor of the Nigerian 
business environment has inverse effect on the market share of the SMEs. The study concludes that 
the environmental audit behaviour of Nigerian SMES have partial effect on market performance. 

 
Key words: Business environment, economic factor, political factor, socio-cultural factor, technological factor. 

 
 
INTRODUCTION 
 
Small and medium enterprises (SMEs) are submerged in 
environments that are characterised by varying degree of 
uncertainty. Environmental uncertainty represents 
changes in the political, socio-cultural, technological, 
economic, customer and competitive factors that 
constitute a business environment. The degree of 
environmental change of a business environment can be 
identified as mild or turbulent. Changes in the Nigerian 
business environment occur rapidly such that it can be 
described as turbulent. The turbulent changes occurring 
in the Nigerian business environment have imposed eco-
nomic pressure on the competitiveness of Nigerian SMEs 
and have weakened their market performance. To 
remedy this situation, it is expected that SMEs put in 
place decisions that are effective. Effective decisions are 
those that are capable of mitigating the impact of 
environmental uncertainty.  

A necessary condition required to put in place 
decisions that are effective is to thoroughly understand 

 
 
 

 
the dimensions of the environmental factors that are 
responsible for the turbulence. In light of this, Nigerian 
SMES must understand and anticipate the opportunities 
and threats the turbulent business environment presents. 
However, Kotler (2001) remarked that the dynamics in 
most business environments fast out-pace the capability 
of SMEs to keep abreast with the changing trends. If this 
is the case, it becomes logical to get puzzled as to how 
Nigerian SMEs make decisions. To put this research in 
perspective, the study poses the following questions: do 
the decision making process of Nigerian SMEs contin-
gent upon information from the business environment? 
Or do they tend to use intuitive methods? In either 
choice, do the decisions mediate the effects of environ-
mental uncertainty such that market performance is 
significantly improved? An attempt to provide answers to 
these questions gives the rationale for this study. 
 

 
Environmental analysis and strategic fit of Nigerian 
SMES 

 
Abbreviation: SMEs, Small and medium enterprises. The analysis of the business environment is  pre-requisite 



Udjo               072 
 
 

 
to making effective decisions (Beale, 2000). Environ-
mental analysis is the internal communication of external 
information about issues that can have potential effect on 
the market positions of SMEs. Albright (2004) noted that 
the process of environmental analysis comprised of five 
steps: identify the environmental information; gather the 
information; analyze the information; communicate the 
information and results; and make informed decisions. 
Nigerian SMEs face plethora of challenges in carrying out 
these tasks. These challenges include poor managerial 
skills, poor technical skills and inadequate finance 
(Ogunsiji, 2002; Akande and Laduna, 2010; Olutunla and 
Obamuyi, 2008). In analysing the business environment 
managerial skills are required to diagnose the threats and 
opportunities that lie therein, technical skills are required 
to synthesize the nature and complexity of the interaction 
of the threats and opportunities and capital is needed to 
finance the inputs associated with these arduous tasks. If 
Nigerian SMES lack these core capabilities, it will not be 
overemphasis to state that the spates of closure of SMEs 
in Nigeria are adduced to a lack of these essential 
requirements.  

Inputs from the business environment enable SMEs to 
create “strategic fit” with the environments in which they 
operate. To create a strategic fit, Zhang and Lado (2001) 
divided the tasks involved into two phases. According to 
these authors, the first phase entails scanning of 
information from the micro and macro environments. The 
analysis of the information yields intelligence which is 
utilized for strategic decisions. The second phase 
comprised of four activities namely: strategic formulation; 
corporate capability; real time strategic response and the 
implementation of the strategies. On the basis of 
environmental analysis, SMEs are likely to achieve higher 
sales growth, high market share, high returns on assets, 
and high margins on profit (Carland and Carland, 2003; 
Gibson and Casser, 2005). Similarly, SMEs tend to be 
more innovative, employ new processes and achieve 
international growth if their decisions are contingent on a 
thorough understanding of the business environment 
(Lucio et al., 2002; Beaver and Prince, 2002; Jocumsen, 
2004). It is evident from the foregoing that environmental 
analysis is critical to the survival of SMEs in today’s 
rapidly changing business environments. Given the 
importance of environmental analysis, it is pertinent to 
examine the way Nigerian SMEs create the so-called 
strategic fit. 
 
 
Conceptual framework and hypotheses 
 
The conceptual framework considers two paths to 
decision making by Nigerian SMEs (Figure 1). The first 
path presumes that SMEs scan the turbulent business 
environment for the purpose of data collection. The data 
generated are analysed and transformed into useful 

 
 
 

 
information. On the basis of the information, SMEs make 
their decisions. This postulate leads to the six (6) 
hypotheses which states that: 
 
H1a: there is significant relationship between decisions 

made based on information about technological variables 
and market share of Nigerian SMEs. 
H1b: there is significant relationship between decisions 
made based on information about socio-cultural variables 
and market share of Nigerian SMEs.  
H1c: there is significant relationship between decisions 
made based on information about economic variables 
and market share of Nigerian SMEs. 
H1d: there is significant relationship between decisions 
made based on information about political variables and 
market share of Nigerian SMEs.  
H1e: there is significant relationship between decisions 
made based on information about customers’ and market 
share of Nigerian SMEs. 
H1f: there is significant relationship between decisions 
made based on information about competitive variables 
and market share of Nigerian SMEs. 
 
The framework asserts in the second path that SMEs are 
perplexed with the interconnectedness of the factors that 
constitute the Nigerian business environment. For this 
reason, they are unable to discern the environmental 
factors that constitute threats and opportunities. In light of 
this assumption, SMEs chooses to intuitively make deci-
sions which are guided by needs and values of decision 
makers. Against this backdrop, the study hypothesizes 
that: 
 
H2: There is significant relationship between decisions 

made based on intuition and market share of Nigerian 
SMEs. 
 
 
MATERIALS AND METHODS 

 
The sampling frame for the study was collected from the Corporate 

Affairs Commission, Abuja. The frame contains list of registered 

companies on industry basis. From the frame, probability sampling 

technique was used to select the 129 SMEs that were studied. The 129 

SMEs satisfy the European Union (2003) definition of Small and 

medium sized enterprises. Although, a total of 147 SMEs were originally 

sampled, the responses from 129 SMEs were found useful. The 

questionnaire used to generate the research data examined 

environmental issues relating to Technological, Socio-cultural, 

economic, political, customer and competitive factors. These factors 

were measured on a five point likert scale ranging from 1 (strongly 

disagree) to 5 (strongly agree). These factors according to Kotler (2001) 

constitute the effective ingredients of a business environment. Market 

share, which is a prime measure of market performance was also 

measured on a five point likert scale ranging from 1 (strongly disagree) 

to 5 (strongly agree). Decision making pattern was examined by asking 

if SMEs decision making activities are based on information from the 

business environment or not. In other words, decision making pattern 

was measured using 



Udjo 11165 
073       Afr. J. Environ. Econ. Manage.  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Figure1. The conceptual model. 

 
 

 
dichotomous scale. The data generated was subjected to 
descriptive and correlation analyses. 
 

 
RESULTS 
 
The result of the descriptive analysis is shown in Table 1. 
According to the table, the decision making pattern of 56 
SMEs is based on information from the turbulent 
business environment. This accounts for 43.4% of the 
sampled SMEs. 73 SMEs based their decision making 
activities on intuition. This accounts for 56.6%. The result 
of the correlation analysis is presented in Table 2. 
According to the table, one of the four items used to 
measure technological factor of the Nigerian business 
environment shows positive correlation with market share 
(r = 0.463, P ≤ 0.01). Similarly, one of the three items 
used to measure socio-cultural factor reveals statistical 
significance with market share (r = -0.186, P ≤ 0.05). 
There is no correlation found between market share and 
economic factor as well as between market share and 
political factor of the Nigerian business environment. One 
of the five items used to measure customer factor 
correlated with market share (r = 0.411, P ≤ 0.01). The 
analysis of industry competition indicates that one of the 
four items used to measure this factor shows statistical 

 
 

 
association with market share (r= 0.378, P≤ 0.01). The 
examination of the relationship between decision making 
based solely on intuition and market share indicates 
inverse statistical association (r= -0.252, P≤ 0.01). 
 
 
DISCUSSION 
 
The results of the correlation analyses reveal that 
technological factor partially promotes the market 
position of Nigerian SMEs. This is as a result of the 
correlation of one of the four items used in measuring this 

factor. The study therefore partially accepts H1a. The test 

of H1b reveals inverse relationship between market share 
and socio-cultural factor. This indicates that the market 
performance of Nigerian SMEs decreases as they 
engage in the analysis of the socio attributes of the 

Nigerian business environment. On the basis of this, H1b 

is partially accepted. The tests relating to H1c and H1d did 
not show statistical significance. These results indicate 
that the analyses of these two factors do not have impact 
on the market performance of Nigerian SMEs. In light of 

this, the study refutes H1c, H1d and H1e is partially 
accepted because one of the five items used in 
measuring customer factor shows statistical significance 
with market share. 



Udjo               074 
 
 

Table 1. Decision based solely on environmental Information. 
 

  Frequency Percent Valid percent cumulative percent 
 Yes 56 43.4 43.4 43.4 

Valid No 73 56.6 56.6 56.6 
 Total 129 100.0 100.0 100.0 

 
 
 
 

Table 2. Correlation. 
 

Decision based on information from the business environment  
Analysis of socio cultural factor Market share 
We have a strong commitment to knowing the population size and distribution -.186* 
We have a strong commitment to knowing the age distribution of the population .095 
We have a strong commitment to knowing the income distribution of the population -.088 

 
Analysis of technological factor Market share 
We have a strong commitment to knowing new manufacturing processes -.162 
We have a strong commitment to knowing new products and services of our competitors .057 
We have a strong commitment to knowing new technology that could impact our enterprise .463** 
We have a strong commitment to knowing the costs and accessibility of electrical power .041 

 
Analysis of political factor Market share 
We have a strong commitment to knowing the political stability and risks pertaining to our enterprise .002 
We have a strong commitment to knowing the budget deficit or surplus .103 
We have a strong commitment to knowing the copyright and patent laws -.084 
We have a strong commitment to knowing the minimum wage laws -.072 

 
Analysis of economic factor Market share 
We have a strong commitment to knowing the GDP and per capita -.053 
We have a strong commitment to knowing the unemployment rate .041 
We have a strong commitment to knowing the current exchange rates -.114 
We have a strong commitment to knowing the consumers and investors confidence -.154 
We have a strong commitment to knowing the economic growth -.098 
We have a strong commitment to knowing the inflation rate .028 

 
Analysis of the customer Market share 
The enterprise always look forward to finding new ways of creating customer value in our products -.013 
The enterprise encourages customer feedback .054 
The enterprise measures customer satisfaction on a regular basis -.077 
The enterprise’s objectives are customer driven .102 
The enterprise has a strong commitment to customers .411** 

 
Analysis of industry competition Market share 
The enterprise responds rapidly to competitors actions .378** 
The enterprise regularly collects data on competitors activities -.168 
The enterprise regularly monitors competitors marketing activities -.066 
The enterprise regularly collects data on industry competition .097 
Intuition -.252** 

 
** Correlation is significant at the 0.01 level (2-tailed). 



075       Afr. J. Environ. Econ. Manage. 
 
 

 
The relationship indicates that the market performances 

of Nigerian SMEs appreciate as a result of engaging in 

analyzing the customer. The study partially accepts H1f. 
This is due to the fact that one of the four items used to 
measure industry competition correlated with market 
share. This suggests that the analysis of industry 
competition have partial impact on the market 
performance of Nigerian SMEs. The analysis further 
reveal that decision based on intuition have partial 

correlation with market share. In view of this, H2 is 

partially accepted. The nature of the partial correlation 
shows inverse relationship. This suggests that that the 
market performance of Nigerian SMEs is negatively 
affected when decisions are based on intuition. The 
partial nature of the correlations corroborates the view 
that Nigerian SMEs lack the managerial skills, technical 
skills and finance to carry out effective audit of the 
turbulent business environment (Ogunsiji, 2002; Olutunla 
and Obamuyi, 2008; Akande and Ladanu, 2010). 
 
 
Conclusion 
 
This paper examines the moderating effect of environ-
mental audit on market performance of Nigerian SMEs. 
The results reveal that the environmental audit of 
Nigerian SMEs has partial effect on market performance. 
Specifically, in quest to improve market performance, 
Nigerian SMEs attempt to analyse the technological, 
customer and competitive factors of the business 
environment. 

Udjo 11167 
 
 
 
 
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