The success stories of immigrant entrepreneurs are well documented worldwide. In South Africa, that success created mixed feelings among the locals as immigrant entrepreneurs are often perceived as being opportunistic and cunning in business. There is not much research on the business practices that are applied and how they influence business performance.
This research study aimed to explore and sought an in-depth understanding of the business practices that immigrant entrepreneurs put into practice and how they affect business performance.
The research was carried out in Germiston and Kempton Park in the Ekurhuleni metropolitan, in Gauteng province. Moreover, the study focused on legally operated businesses by immigrant entrepreneurs.
To enable the exploration of personal experiences, a qualitative research approach was used. Twelve in-depth face-to-face interviews using semi-structured questions were conducted to collect data.
The study established that immigrant entrepreneurs in South Africa indeed implemented business practices, and advertising was used by all 12 participants. Word of mouth, which created loyalty, came out as the most trusted and valued business practice that all immigrant entrepreneurs relied on.
The study deduces a strong positive relationship between implementing business practices and improved business performance. This study revealed that entrepreneurs applied different business practices (such as advertising, transportation and pricing) simultaneously to promote and improve business performance.
The success of immigrant entrepreneurs has been attributed to the growth and development of many developed and developing countries, and South Africa is no exception. The contribution of immigrant entrepreneurs in the industrialisation of South Africa is well documented (Gastrow & Amit
In South Africa, immigrant entrepreneurs are regarded as opportunistic and conquering certain business sectors. Newspapers reported that immigrants did not add value to the economy; instead, they came to invade and exploit South African resources, thereby negatively influencing the perception of locals towards immigrant entrepreneurs (Moyo
The perceived prominence was affiliated to the view that immigrant entrepreneurs were monopolistic (Charman, Petersen & Piper
Therefore, this research sought to identify the business practices immigrants implement and how they affected business performance. This study contributes to the literature by addressing the debatable questions linked to the reasons behind immigrant entrepreneurs’ success.
The study ought to answer the following questions:
What business practices do immigrant entrepreneurs implement?
How does the implementation of business practices affect the performance of businesses owned by immigrant entrepreneurs?
In South Africa, the number of immigrant entrepreneurs is rapidly increasing, which could indicate the availability of a lot of unexplored opportunities and high profitability (Radipere
According to Najib (
Necessity immigrant entrepreneurs in South Africa operate different businesses. The West African immigrants dominate the nightclubs, traditional clothing, wedding dresses and food retailing, whereas those from Mozambique and Zimbabwe are specialised in selling curios and repairing vehicles (Kalitanyi & Visser
This research adopted a mixed embeddedness theory, which is better suited to exploration and explaining research subjects. Mixed embeddedness is a combination of theories that focus on immigrant entrepreneurs’ inclusion in the socio-economic, cultural and political environment in the host country (Akın, Bostanci & Akyol
Business practice is the method of how to achieve a competitive advantage (Hesterly & Barney
In Delft, Cape Town and Cosmo City, Johannesburg, Somali immigrant entrepreneurs were noted as possessing the similarity of using intermediaries to broker deals for them (Charman et al.
Immigrant entrepreneurs are famed for making use of networks in their communities as a business practice (Cobbinah & Chinyamurindi
Gastrow and Amit (
The issue that is contrary to the views of Somalis who do not own the shops, but are merely workers, is addressed. According to Gastrow and Amit (
Ngwenya (
According to Dalrymple (
Measuring business performance is very complex, intricate and still in the developing stages (Dalrymple
Financial tools measure performance using the monetary results of a business, known as tangible assets, using elements such as financial ratios.
Non-financial tools entail evaluation of business performance using business products or services, known as intangible assets, such as human capital, goodwill and customer loyalty (Buttenberg
Traditionally, financial ratios were used to measure business performance; however, they were prepared by experts and came at a huge cost (Kirsten, Vermaak & Wolmarans
In the modern era, there are various business performance measuring tools such as the balanced scorecard (BSC), which uses both financial and non-financial elements. However, in South Africa, it is not applied in SMEs but rather by large companies (Kirsten et al.
According to Garg et al. (
In this study, researchers interviewed the participants on whether market share, sales, investments or income had increased or decreased to determine business performance. The approach is inclusive of both financial and non-financial measuring tools. The decision was influenced by Kotane and Kurzimina-Merlino (
As previously stated by Olawale and Garwe (
According to Van Zyl (
According to Kothari (
Therefore, researchers adopted the exploratory research method in this article as it discovers in-depth information, gains deep insights and has a thorough understanding of phenomena (Cooper & Schindler
According to Leedy and Ormrod (
There are 687 867 SMEs operating in Gauteng (Small Enterprise Development Agency (SEDA)
The researchers agreed on a sample size of 15 participants. As stated by Salkind (
The participants should be immigrant entrepreneurs operating in the Ekurhuleni Municipality of South Africa.
Immigrant entrepreneurs should be documented in South Africa and operating legally registered businesses.
The participants should be the owners of the business.
The participants must be between the ages of 18 and 65 at the time of the interview.
In this study, individual in-depth interviews (conducted in English) ranging between 30 and 111 min were used to collect data by the researchers from 01 June to 03 August 2020. The researchers firstly compiled an interview guide with various questions that were adapted from previous studies such as Ngwenya (
The interview field notes and audio recordings were transcribed using Microsoft Word and analysed using ATLAS, ti Version 8. Thereafter, the transcribed document was coded and categorised. Six categories known as classes were thereby generated from the 29 codes.
To ensure that the research is trustworthy, various frameworks were applied. These frameworks guaranteed the quality and ethicality of the research results. Credibility was ensured as the participants were verified and described accurately with pseudonyms. These consisted of names like B1, B2, until B12 for all 12 participants. B1 represented Bag 1; researchers used a different zipper bag for each interview session. Dependability was achieved by ensuring that coding was accurate. The researchers repeatedly checked transcripts and stored them securely in a lockable home office for interested parties when requested.
Confirmability was maintained by describing the interview results verbatim and rechecking that all field notes and audio recordings were accurate. Authenticity was upheld by ensuring original transcripts, and audio recordings were stored accordingly and are readily available in case requested for verification. Confidentiality was maintained by guaranteeing the anonymity and assurance of participants of privacy after the research, as there are no records of participants’ names.
An application for full ethical approval was made to the UNISA Department of Ethics Review (DAM-RERC), and ethics consent was received on 18 May 2020. The ethics approval number is 2020_CEMS_DAM_005.
This section outlines and analyses the findings of the research based on the responses of the 12 participants interviewed. The participants were answering questions on the business practices they used and whether any advantages or disadvantages were derived. This information is provided verbatim in quotes. The participants in the research all agreed that they had made use of different business practices to enhance business. The researchers, therefore, had to adopt the definition by Agwu (
Modes of advertising used in the study include print media, banners, social media and billboards. The popular and affordable means were pamphlets, social media, banners and business cards. Only two of the 12 participants did not use paid advertising; they instead made use of only free modes such as word of mouth and social media. When asked if they used advertising in their businesses, participants provided the following responses:
‘No, because my shop has been here for a long time.’ (B3, 40 years old, male)
‘No, I did not do it, and then I think the people do it first, they come with another one or the send some another.’ (B4, 41 years old, female)
Biz 3 claimed that there was no reason to advertise as his shop has been operating for many years, and it is well known. Biz 4 also shared similar sentiments but relied mainly on his customers to advertise the business. Various participants acknowledge that advertising had a positive effect on the sales, profit and customer base. Placing adverts in newspapers was widely regarded as very expensive by various participants. They noted that:
‘Yes, why not. I make material for others to advertise their businesses. I have banners, business cards, active social media presence. We are on every popular platform. We also do newspapers once in a while.’ (B11, 48 years old, male)
‘Newspapers we did a few times a few years ago. We have a website that my grandsons operate for me. It does have all our social media details. So, it is pretty easy to get hold of us. On the website, they can book a table, when and what time, the type of food.’ (B12, 61 years old, female)
The participants’ B5, B7, B9, B10 and B11 all indicated how advertising positively influenced the business sales, profit and customer base continuously. This supports Mishra and Mahalik (
The findings revealed that word of mouth was the most widely used and popular means to spread information about a business, and it created loyalty. Good customer service was emphasised as the basis for creating goodwill among customers. As customers appreciate the good service, they become loyal and attached; therefore, subconsciously, they market and advertise the business. The participants indicated that:
‘People see the signs out there, others are told by their friends.’ (B7, 39 years old, male)
‘Mostly it is word of mouth.’ (B8, 44 years old, female)
‘Word of mouth. I mean is the greatest form of advertising.’ (B10, 45 years old, male)
‘The most efficient is word of mouth by customers who are impressed and satisfied with our service.’ (B11, 48 years old, male)
The participants outlined how word of mouth was the most valued way to disseminate information about the business, as there were no costs involved.
Various participants admitted to and regarded personal relations as vital to business performance. Participants highlighted how having a strong relationship was beneficial as they received information about promotions and discounts from the suppliers before most of the public. In the event of facing business challenges, suppliers are willing to assist with restocking if there are good relationships. The participants provided these responses:
‘I now have established connections, so I can order online then make the payment.’ (B4, 41 years old, female)
‘With my suppliers we are okay, you see they trust me, I trust them. I order online pay online and they deliver everything in good condition with no problems.’ (B5, 46 years old, male)
The findings are aligned with Sekatane (
Various participants noted buying in bulk and were incentivised by receiving discounts and free transportation. The interaction with suppliers was essential in determining the discount and transportation. Business owners revealed how collaborating was used to ensure that they get favourable prices from wholesalers. Saving on transportation costs was noted as a valuable cost-saving mechanism. Immigrant entrepreneurs engage in co-investment rather than the misconception of bulk buying (Gastrow & Amit
‘Everything that we order is either they charge us for delivery, or we go collect ourselves.’ (B2, 34 years old, male)
‘Yeah, we share transport.’ (B3, 40 years old, male)
‘They provide free delivery if you order more than 15 boxes. If it is less, then you have to pay a small delivery fee.’ (B8, 44 years old, female)
‘The ones we import we use couriers mostly, locally sourced material usually my husband and I get them from the fresh food market. We have a few suppliers with farms around Johannesburg they deliver themselves. If you buy in bulk, you most likely to get a discount.’ (B12, 61 years old, female)
These findings are in line with assertions by Ngwenya (
According to Ngwenya (
There was a trend of setting a very low mark up on goods and services in various businesses.
The idea behind this was to offer affordable products to customers. Cash was the most widely used mode of payment. Savings derived from economies of scale enabled immigrant entrepreneurs to charge lower prices and provide credit. Lower prices were attributed to drawing price-conscious customers, which, in turn, increased sales and profitability. Regarding pricing and payment methods, the participants pointed out the following:
‘I display my prices. So, if you afford, you just buy. If you cannot afford you just look and move on.’ (B5, 46 years old, male)
‘We really put a low margin because we have a lot of competition when it comes to that side of the business. So, prices have to be in line with our competitors or else you will not have clients.’ (B7, 39 years old, male)
‘We have very flexible prices.’ (B9, 36 years old, female)
The following findings can be comparable to assertions by Adendorff and Halkias (
‘No, and Yes, I have people I trust, my good customers, I give credit but if you have a new customer no.’ (B5, 46 years old, male)
‘Unfortunately, we do not offer credit unless in certain special circumstances when maybe a regular customer does have an urgent matter and they are not able to pay. We make exceptions, but it is only for those people who have been doing business with us for a long time.’ (B9, 36 years old, female)
‘Some of the times I have done credit, or you can do a lay-bye of at least 50% you know, you leave the product with me and when you complete it, then, you can get your product.’ (B10, 45 years old, male)
‘Yes definitely, we have people whom we give credit, we prepare food for them and they pay at a later stage but, it is trustworthy people. If for example, it is a wedding, we usually offer lay-byes.’ (B12, 61 years old, female)
The findings are in accordance with Ngwenya (
Long operational hours and working during the weekends and public holidays are a business practice used by immigrant entrepreneurs (Ibrahim
‘Yeah, seven days a week.’ (B3, 40 years old, male)
‘We are very hard workers; you see even Sundays we work. We open from morning until at very late.’ (B5, 46 years old, male)
The participants agreed with previous studies that immigrant entrepreneurs benefitted immensely from long operational hours as customer demands are always met (Gastrow & Amit
The participants all acknowledged how essential it was to infuse communication using a local language as beneficial to the business. All immigrant entrepreneur strategically located their business in areas with high numbers of human traffic. According to Khosa (
‘I have seen that a lot of our local people here they like to use the local language. So basically, it would help out I would say to use those local languages.’ (B2, 34 years old, male)
‘Yes, and No my brother you see most of my customers are these young generations those working probably not married, so they communicate in English.’ (B5, 46 years old, male)
‘Yes, definitely I do, I have learnt a couple of local languages.’ (B9, 36 years old, female)
‘Yes, of course, you become one with the people, it is easier to communicate, and your customers also feel comfortable around you. I mastered the local languages very well.’ (B12, 61 years old, female)
‘It is in the mall, and I am renting.’ (B4, 41 years old, female)
‘You see this place the rent was reasonable plus there were no other shops close to me. I looked for a few places and I wanted one whereby my customers could see me easily.’ (B5, 46 years old, male)
‘So actually, the business is like this, it moves like this. It depends with the site you are and what you have.’ (B6, 48 years old, male)
‘You see we are in a busy area full of young people, so they see the signs out there.’ (B7, 39 years old, male)
‘Mostly I can say young people, you see those doing job applications or school children. We are close to two colleges, a police station, and Home Affairs office. So, we have a lot of traffic in here. You see being in the CBD alone is a selling point.’ (B8, 44 years old, female)
‘For us, we had to be in a place which is safe, close to a lot of businesses and easily accessible. As you see parking is plenty and we can be easily located.’ (B9, 36 years old, female)
These findings are in line with Ngota, Mang’unyi and Rajkaran (
Participants benefitted immensely from being part of a community whereby elders provided guidance and taught business skills. Those faced with challenges and had conflict resorted to social networks for remedies. Mentorship and provision of finances were the main benefits of social networking. Various participants acknowledge being part of a social network and noted how their businesses benefitted immensely from the association. Another participant (Biz 12) claimed being a mentor to upcoming business owners in the community. The participants clarified that:
‘Business is all about saving costs, so we are always on the lookout for that. So, we constantly engage each other. Since we cannot get bank assistance, we have to help each other as a community.’ (B8, 44 years old, female)
‘Yes, we do with other Zimbabwean business owners we share ideas on how to run a business.’ (B9, 36 years old, female)
‘It is important to stay in touch and abreast, we have friends who are economist and others with the insurance industry. They share their views on how we should look after our business. Especially planning when it is right to take a risk and when not to. You see as a business you can never know everything, so you learn a lot from interacting with others. Even sourcing of raw materials, you get leads from other fellow businesspeople.’ (B11, 48 years old, male)
‘Now I am actually like a mentor to the young ones starting businesses. So, we teach each other, share ideas, and sometimes help young people with finances.’ (B12, 61 years old, female)
The results have similarities to Tengeh and Nkem (
The findings unearthed that small businesses in terms of infrastructure ascertained business performance using sales volumes and profit. Various participants admitted to having been affected by COVID-19, which strained business performance for the financial year-ends 2020 and 2021. According to Karunanayake (
‘I would say I use both profit and sales to gauge business performance. The current situation it is quite bad, but before this COVID-19 thing, it was okay. I would say it was well, it was doing well.’ (B2, 34 years old, male)
‘Since I started, I have managed to grow a lot. My sales are way higher, and we are performing very well. I will still have to judge this year because Corona grounded everyone.’ (B5, 46 years old, male)
‘Business is good, we are doing very well. On my side I have to look at profit. We also check the people who open new accounts monthly on the café side and Laundromat side.’ (B7, 39 years old, male)
‘Mostly we look at our sales, then we consider the profit and investments we did to the business. You see one year my profit might be low but on the other side, I added new machinery in the business to make it function better.’ (B8, 44 years old, female)
‘We have different ways, like anyone else first thing is profit and sales, and then we consider other things like equity and assets we acquired. We have been doing very well, only the first year was tough because we invested heavily in machinery, but now it is growth every year. All the cars we have it is the business, the building and the expansion happening it is all returns of the business.’ (B11, 48 years old, male)
‘We consider a lot of factors like profit, sales volumes and also our investments. With profit, you compare with previous years or on a monthly basis, same as sales volumes, then with the investment, we tally up what we managed to acquire as a business over a certain period. All that is considered after removing all the expenses incurred by the business like the salaries and inputs.’ (B12, 61 years old, female)
Immigrant entrepreneurs were not forthcoming with their financial records; therefore, the assessment was done through observing physical assets and oral evidence on sales and profit. The same notion was raised by Zulkiffli and Perera (
As previously indicated, this study is guided by two research questions, and forthcoming is a discussion of the findings:
What business practices do immigrant entrepreneurs implement?
The study revealed that the following are the business practices used by immigrant entrepreneurs:
Social networking
Business location
Relationships with suppliers and customers
Bulk buying and transportation
Operational hours
Pricing and payment methods
Provision of credit lines and discounts
Advertising
There was a consensus among the various participants that pamphlets, social media, banners and business cards were the cheapest and most effective modes of advertising. Among all participants, word of mouth was regarded as the widely used practice that did yield returns. The findings outline that the implementation of business practice was not necessarily as outlined by Porter’s business-level model; various participants indicated how multiple business practices were implemented simultaneously complementing each other in the creation and maintaining of a competitive advantage. As such, the findings are aligned with previous studies by Ngwenya (
The study reflects a strong indication that the application of business practices was beneficial to the performance of a business. In this study, every participant acknowledged making use of business practices in business. The researchers discovered that immigrant entrepreneurs were not opportunistic as indicated in other studies. As necessity immigrant entrepreneurs, they rarely have an option besides making the business succeed, thereby working tirelessly to ensure the success of the business:
How does the implementation of business practices affect the performance of businesses owned by immigrant entrepreneurs?
In this study, various participants explained how advertising continuously enhanced their sales, profit and customer base. Bulk buying was highlighted for lowering costs through economies of scale, which contributed to positive business growth. This study advances our understanding of business practices such as combining hard-working employees and long working hours, which led to positive business performance and expansion.
Various scholars such as Muchineripi et al. (
The findings exhibit that combining business practices improved business as new customers bring with them increased sales and market share, which lead to a positive influence on business performance. Participants acknowledged being profit driven and that business practices enabled business success. The researchers suggest that there is propinquity between advertising a business and increased sales in a shop, which thereby result in realising more profit. In this study, various participants indicated how profitability derived from the implementation of business practices enabled them to expand by investing in new machinery, vehicles and buildings.
All businesses had a clear expansion plan and noted that business practices were integrated either as combined or implemented concurrently. Word of mouth came out as the most prominent option for promoting a business and retaining customers. Saving on expenses by employing family members was vital in improving business performance. According to the study, there is an interconnected between implementing business practices and improved business performance.
The research focused on a particular economic area with only 12 participants, and the results, therefore, might turn out differently if applied in another town or country. Generalisation is impossible as each area possesses its own characteristics and traits. Personal experiences, which form the core of this study, can be influenced by various factors and vary according to location.
Despite the contributions, this study factors in some limitations. Therefore, regarding future research opportunities, there is a need to look further into how much are the costs incurred to implement business practices and if the results are justifiable. Furthermore, exploring another gap in the research is the lack of indication on how long it takes immigrant entrepreneurs to notice a change after implementing a business practice. Finally, not much is known about how the financial assistance obtained from relatives and the community is managed and repaid.
The authors would like to specially thank the Department of Applied Management, University of South Africa for the invaluable support that contributed to the success of this manuscript.
The authors have declared that no competing interest exists.
All authors contributed equally to this work. T.C. conducted the initial research as part of his master’s dissertation under the supervision of R.M.K. and M.P.
This research received no specific grant from any funding agency in public, commercial or not-for-profit sector.
The data that support the findings of this study are available from the corresponding author, T.C., upon reasonable request.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any affiliated agency or the authors.