Stock management and sustainable financial performance of SMEs in the mobile industry in Cape Town, South Africa

Abstract

SMEs in the mobile industry have high telecommunication costs such as high stock costs and deactivation of SIM cards, perceived to be the major problem contributing to their stagnant financial performance. The objective of the paper was to investigate the implication of stock management on the financial performance of SMEs in the mobile industry in Cape Town, South Africa.  A questionnaire survey was undertaken with a sample of 50 SMEs in the mobile industry to obtain quantitative data. The data was analysed using descriptive and inferential statistics through SPSS and Microsoft Excel power pivot. The results of the analysis revealed that most sampled SMEs prepared stock budgets and that the most commonly used stock management technique was the economic order quantity. It also revealed inexperienced personnel, lack of expertise in stock handling, poor store records and inadequate funds as the main factors hindering effective stock management. The correlation analysis results showed positive correlation of 0.65 between stock turnover and liquidity, and 0.71 between stock turnover and profitability. As a result, the study revealed that stock management impacts positively on the financial performance of a business. The study suggests that to tackle the root causes of poor financial performance among South African SMEs in the mobile industry, effective stock management is crucial.