An Assessment of the Impact of Foreign Businesses on Financial Performance of Small and Medium Enterprises in Zambia - A Case of Chain Stores in Lusaka, Zambia

Abstract

This study is an assessment of the impact of foreign businesses on the financial performance of Small and Medium Businesses in Zambia. The study employs a sample of 18 SMEs whose businesses are premised near the foreign chain stores all picked through purposive sampling and based on relevance to the research objectives. Using a mixed-methods approach grounded in positivist philosophy, the research investigates the extent of exposure to foreign competition, its financial implications, and strategies for enhancing SME competitiveness. The study's findings indicate that foreign business presence doesn't significantly impact SMEs' short-term financial performance, but rather affects their long-term growth trajectory. Additionally, the presence of foreign businesses has no statistically significant impact on domestic businesses' Return on Assets (ROA) and Return on Equity (ROE), as evidenced by regression analysis showing positive but insignificant coefficients for both metrics. Furthermore, the study reviews that SMEs have been negatively affected in terms of access to capital, technology, and trading infrastructure, which are essential resources for business growth and development. The study provides insights on the impact of foreign competition on SMEs in developing countries like Zambia in comparison with the findings in the literature from other countries. The study recommends that policy makers set policies that are intended at ensuring SMEs have access to capital, trading infrastructure and support through training, sourcing of technological tools and partnership opportunities. This recommendation is crucial in creating an enabling environment for SMEs to thrive as a back bone of Zambian economy, employment creation, innovation and economic growth. Overall, this study provides a comprehensive understanding of the impact of foreign businesses on SMEs in Zambia and highlights the need for policymakers to create a supportive environment that enables SMEs to thrive thereby enabling SMEs overcame the challenges posed by foreign businesses and contribute to the growth of Zambian economy.