‘Fostering SMEs survival through cost reduction’: Evidence from SMEs in Harare

Abstract

The current, volatile, uncertain, complex and ambiguous (VUCA) environment has raised the need to manage costs in SMEs in order for them to survive. The aim of this research was to analyse the cost reduction strategies that foster survival of SMEs. Theoretical and empirical literature was reviewed; however, the researcher did not find sufficient literature on cost reduction strategies employed by SMEs in Zimbabwe. It is this gap that this research sought to address. An explanatory research design was used in this study. A survey in the SMEs sector was conducted and a structured questionnaire was used to collect the data from 200 managers of SMEs. Validity and reliability of the questionnaires was ensured through pilot testing and testing reliability using Cronbach alpha. A Cronbach’s alpha value of 0.836 was obtained. The data was analysed using SPSS version 20. Descriptive statistics, factor analysis and correlations were conducted to determine the cost reduction strategies that foster survival of SMEs.The factor analysis indicated 14 cost reduction strategies foster survival of SMEs. A correlation analysis indicated that all the 14 cost reduction strategies had positive correlation with survival of SMEs. Findings from the Kruswallis test of differences showed that there was no statistical difference in the cost reduction strategies for SMEs in different sectors. Cost reduction strategies are very important for SMEs survival because of their significant influence to survival of SMEs. It is very important for SMEDCO together with government to provide guidance to SMEs on the cost management practices that will foster their survival. This can be achieved workshops, training programs for SMEs managers, and providing education. The management must leverage costs that influence the profit line, both for the company and its competitors. Management of SMEs must place a cost control mechanism that would identify and manage all the cost drivers of companies. Future studies can be conducted to compare studies on cost reduction strategies in Zimbabwean SMEs and SMEs from another developing countries.