Contract discipline:The case of small scale manufacturing enterprises in Nairobi

Abstract

Small scale enterprises are ,generally viewed as lacking contract discipline in terms of the quality of products, meeting of deadlines and cost. This negative perception of the enterprises as lacking respect for contractual obligations deters people from doing business with these firms, limiting their stability and growth. This study sought to examine this view with regard to small scale manufacturing enterprises in Nairobi to identify the possible causes of the indiscipline. Not much research has been conducted in this area and little is known about the subject. The study was thus exploratory in nature. Data was collected from small scale manufacturing enterprises as well as their customers by way of in-depth interviews using questionnaires. The data collected was then analyzed at three levels. The first level involved a summary of the main characteristics of the enterprises sampled, to provide background information on the enterprises. At the second level, the data was analyzed in terms of the three issues of quality, cost and deadlines. The final analysis comprises the reactions of the customers of the small scale enterprises to the three issues. Both the small scale enterprises and their customers readily admitted to problems in contract discipline with regard to the three aspects of quality, cost and deadlines. However their reaction to the causes and effects of the indiscipline were varied. The enterprises largely blamed economic hardship - what many described as a hand to mouth existence, limited education, lack of practical training and myopia on the part of the proprietors. All the customers interviewed reported at least one negative experience in their dealings with small scale enterprises. They attributed the inability of the enterprises to meet their contractual obligations to lack of appropriate training, laxity, and greed. They all confirmed that the indiscipline on the whole made them hesitant in dealing with the small scale enterprises. Many admitted that they only went to the enterprises when they had no alternative or when the transaction was not crucial and they could afford the luxury of something going wrong.