The challenges of Globalization on Small Medium Enterprises

description on undertaking background.

In the context of Tanzania, the bulk of SMEs autumn under the informal sector and prosecuting up to 4 people, in most instances household members or using capital amounting up to Tshs.5.0 million / $ 3,235.83. ( Tanzania chamber of commercialism industry and Agriculture, 2007 ) . “ The SMEs cover non-farm economic activities chiefly fabricating, excavation, commercialism and services. ” ( Tanzania ministry of industry, trade and selling, 2007 ) .

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It is easy to set up SMEs all over the universe and in Tanzania in peculiar, since their demands in footings of capital, engineering, direction and even public-service corporations are non every bit demanding as it is the instance for big endeavors. These endeavors are besides established in rural scenes and therefore add value to agro merchandises and at the same clip ease the dispersion of endeavors.

“ About one tierce of the GDP originates from SME sector. The sector has more than 1.7 Million concerns, prosecuting about 3 million people, who occupy about 20 % of the entire labour force. 92 % of the one-year school departers ( at all degrees ) in Tanzania are potentially absorbed by the SME sector. There are about 700,000 new entrants in the SME sector every twelvemonth. ” ( Saiguran, 2007 ) Therefore it is reflected already that the SME sector plays a important function in the economic system.

Some of the jobs faced by SMEs in Tanzania include ;

“ SMEs represent a higher recognition hazard because they frequently lack variegation in their beginnings of income and/or are concentrated comparative to big houses, with the possible exclusion of SMEs oriented to the consumer section ( niche market ) . They besides suffer from important uncertainness sing possible revenue enhancement liabilities. There is no Opaqueness in balance sheets therefore reflecting weak accounting patterns and non-transparent information. ” ( Tanzania chamber of commercialism industry and Agriculture, 2007 ) . All this consequences into Bankss being loath to impart them money as a consequence of low recognition worthiness which leaves SMEs with limited entree to finance.

A study from the ( ministry on industry and trade in Tanzania, 2002 ) reports the undermentioned jobs ;

In add-on, Business Development Services, viz. services related to entrepreneurship, concern preparation, selling, engineering development and information are underdeveloped and non readily available.

There is really weak demand for the merchandises produced by SMEs originating from low and dwindling consumer buying power every bit good as competition that arises with similar imported merchandises.

Then once more, SME operators lack information every bit good as grasp for such services and can barely pull off to pay for to pay for the services. As a consequence, operators of the sector have instead low accomplishments. Besides, there is no umbrella connexion for SMEs. Simultaneously, the establishments and associations back uping SMEs are weak, disconnected and uncoordinated partially due to miss of clear counsel and policy for the development of the sector.

Distortionary ordinances impacting SMEs ( Unfavorable legal and regulative model ) . Tanzania is listed among the top 10 hard states to construct a warehouse, it takes 12 processs to register a belongings, A? of Tanzanian concerns complain of revenue enhancement disposal ( local and cardinal ) , and it takes 13 processs to get down a concern and 35 yearss long, at a cost of 161 percent income per capita. These all add up to high conformity costs which tend to cut down the resources needed for investing and high operational costs which consequences into high fight of local domestic merchandises both in internal and external markets.

Another job is every bit far as the substructure is concerned, the roads are really bad therefore impacting conveyance in a manner that it makes it hard and dearly-won to travel goods from one point to another within the state and adds up to costs. The power is besides undependable and unstable and can interrupt deadlines. Communication is undeveloped and dearly-won. It is hard to obtain web in rural countries therefore impacting the concern activities of SMEs and besides impacting their cost of production.

A heavy cost of conformity ensuing from their size is besides one of the jobs faced by SMEs. This is because they have limited resources ( in footings of fiscal agencies and manpower ) . Their disbursement for market research and market entry take a much higher proportion of their entire disbursement.

All in all, this undertaking will be analysing the importance of SMEs in Tanzania and measure their part to the state. The problems/ challenges in footings of growing, and their features in relation to Globalization including those mentioned above will be analyzed. Assorted ways in which SMEs can turn to venture into planetary markets will be sought for their improvement and future sweetening in their concerns.


Brief description of undertaking aims.

( i.e. range of proposal, concepts used, restrictions and significance )

The aim of this undertaking is to look into the impact of Globalization on SMEs in Tanzania. These impacts can be both positive and negative. It will besides measure the importance of SMEs in the Tanzanian economic system. Second, would be to measure the challenges faced by SMEs due to Globalization. Third, a reappraisal on bing Government publicity policies and schemes on the Tanzanian SMEs will be prepared. Last but non least, is to find ways in which the SME ‘s in Tanzania can turn to go planetary participants.

As for the restrictions ; for the questionnaires sent out, the responses may be limited. It would be really hard to acquire the respondents to reply to the questionnaires. Another restriction would be in the choice of the sample. The sampling frame is really huge therefore doing it rather hard to acquire the right respondents for the interviews and questionnaires. As for the sample size which is about 100 people, the restriction is that the cost is comparatively high particularly when carry oning long distance interviews over the phone. Last but non least, this research is limited to SMEs in Dar-es-Salaam so it may non be possible to generalise it to the whole of Tanzania.

The significance of this undertaking is to look at the challenges of SMEs in Tanzania and utilize it as a paradigm to other African states. There is really limited research on SMEs in Tanzania and this undertaking will lend as a research paper. This undertaking will besides open the eyes of SMEs to growing and development in relation to Globalization.


Brief description of the models/theories/concepts that will be used in this proposal.

( i.e. consumer behaviorism theoretical account, CSF and etc. )

In this undertaking some of import internationalisation theoretical accounts will be used, they include, eclectic paradigm of international production by Professor John H. Dunning, Porters Diamond and the theory of Marginal Industry Dilation by Professor Kiyoshi Kojima.

There are three grounds for the usage of the eclectic paradigm. “ First the paradigm is based on the theories about transnational endeavors. Second, the theoretical account can be used to explicate all types of foreign direct investing ( FDI ) . And in conclusion, and most significantly, the theoretical account embraces all the three ways in which a house can prosecute in foreign activities, i.e. foreign direct investing, trade, and contractual resource transportations, e.g. licensing, proficient aid or direction and franchising understandings. Furthermore, the theoretical account makes it possible to foretell which path will be preferred. ” ( Bulcke, 2003 )

Harmonizing to ( Porter, 1998 ) he designed a diamond molded footing of a model to exemplify the determiners of national advantage. This diamond illustrates the national playing field that states set up for their industries. Porters Diamond will be used to show the factors of competitory advantage for SMEs in Tanzania.

The theory of fringy industry dilation is an of import foreign direct investing theory to developing states. Its intension tantrums for the true state of affairs of states in-between and little size endeavors. SMEs could utilize this theory as a way therefore assisting them go abroad courageously and develop transnational direction. The expansive environment and fervent competition will develop SMEs and fix them to confront the challenge of the economic globalisation. ( Free documents, 2006 )


Academic research being carried out and other information, techniques being learnt.

( i.e. literature – what are the names of books you are traveling to read / informations sets you are traveling to utilize )

The books used will largely speak about Globalization, the African economic system, Internationalization.

Diaries, articles, and magazines will besides be referred to.

Some of the mentions include the followers:


Bulcke, 2003, Internationalization towards China after its Accession to the WTO, Katholieke Universiteit Leuven, Departement Oosterse & A ; Slavische Studies, viewed on 1st September 2010, available at ;

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Ministry of Industry, trade and selling, 2007, SME chances, viewed on 1st September 2010, available at ;

hypertext transfer protocol: // cat=15 & A ; subcat=37

Porter, 1998, Competitive advantage of states, Free Press, New York, available at ;

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Saiguran, E, 2007, SME development: Tanzania experience, Small Industries development administration Tanzania, viewed on 4th September 2010, available at ;

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Africa Development bank, OECD, 2005, African Economic Outlook, OECD publication, France, available at ;

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Athanassiou, N. & A ; D. Nigh, 2002, “ The Impact of the Top Management Team ‘s International Business Experience on the Firm ‘s Internationalization: Social Networks at Work ” , Management International Review 42:2, pp.157-181.

Bjorkman, I. & A ; M. Forsgren ( ed. ) , The Nature of the International Firm: Nordic Contributions to International Business Research, Handelshojskolens Forlag, Copenhagen, s.d..

Burgel, O. & A ; A. Fier & A ; G. Licht & A ; G. Murray & A ; E. Nerlinger, 1998, The Internationalisation of British and German Start-Up Companies in High-Technology Industries, Discussion Paper No.98-34, Centre for European Economic Research.

Creswell, J, W. , 2003, Research design: Qualitative, Quantitative and Assorted Methods Approaches, 2nd edition, Sage Publications, Inc, United Kingdom

& lt ; hypertext transfer protocol: // id=nSVxmN2KWeYC & A ; printsec=frontcover & A ; dq=quantitative+and+qualitative+data & A ; cd=1 # v=onepage & A ; q=quantitative % 20and % 20qualitative % 20data & A ; f=false & gt ;

Ghosal, V. & A ; L. Prakash, 1999, The Differential Impact of Uncertainty on Investment in Small and Large Businesses, HWWA-Diskussionspapier 81, HWWA-Institut fur Wirtschaftforschung, Hamburg.

Johanson, J. & A ; Associates, 1994, “ Internationalization, Relationships and Networks ” , Studia Oeconomiae Negotiorum 36, Acta Universitatis Upsaliensis, Uppsala.

Johanson, J. & A ; J.-E. Vahlne, 1994, “ The Internationalization Process of the Firm: A Model of Knowledge Development and Increasing Foreign Market Commitments ” , Journal of International Business Studies 8 ( Spring/Summer 1977 ) , pp.23-32, as publicized in Johanson & A ; Associates, , pp.50-61.

Johanson, J. & A ; J.-E. Vahlne, 1994, “ The Mechanism of Internationalization ” , International Marketing Review 7 ( 1990 ) , pp.11-24, as publicized in Johanson & A ; Associates, pp.84-95.

Johanson, J. & A ; F. Wiedersheim-Paul, 1994, “ Internationalization of the Firm: Four Swedish Cases ” , Journal of Management Studies 12 ( October 1975 ) , pp.305-322 as publicized in Johanson & A ; Associates, , pp.34-49.

Pedhazur, E, J. , & A ; Schmelkin, L, P. , 1991, Measurement, Design, and Analysis ; an Integrated Approach, Lawrence Erlbaum Associates, Inc, Hillsdale, New Jersey

& lt ; hypertext transfer protocol: // id=2Y1RXHYO9UUC & A ; pg=PA305 & A ; dq=explanatory+research & A ; cd=1 # v=onepage & A ; q=explanatory % 20research & A ; f=false & gt ;

Peter, J. , , 1990, “ Internationalization of Small Business in a Microeconomic Perspective ” , International Small Business Series 4, Institute of Small Business, University of Goettingen.


Brief description of the materials/methodologies needed by the proposal.

( i.e. informations aggregation methods, trying, sample size and mark group etc. )

As for the informations aggregation methods, there is a demand to garner primary informations in order to achieve the basic information and get point of views, it includes ; written and on-line questionnaires, telephone and on-line interviews and as for secondary informations it will be used to acquire critical and more in-depth information on research that has already been done, it will largely be used in the literature reappraisal. Here assorted books, diaries, and articles will be used. Academic research will besides be conducted and it will include scholarly articles by assorted universities, pupils or professors.

Descriptive research to depict the features of SMEs will be carried out. The research will seek replies to assorted inquiries, such as what are the jobs faced by SMEs and what ways can be used to rectify them. It is based on old apprehension of the job. The research will be cross-sectional where by a representative subset is studied, at a defined clip.

The sampling frame will include the top and in-between direction of SMEs in Tanzania. The sample size will be about 100 people.

The sampling methods used for this research would be chance and non-probability sampling because the research is huge. Under chance sampling ; Stratified random method will be used therefore choosing SMEs from certain human ecology in Dar-es-Salaam, Tanzania. The simple random sampling will besides be used, therefore taking a pick of 100 SMEs from a pick of 500. The names of some of the SMEs include ; Tanesco, Alexander Forbes Tanzania Limited, Showerlux Industries, Oryx, Gapco, Copper solution company, Raycom enterprises Ltd, Tanzania coffin nail company Ltd, Zain Tanzania Ltd, Precision Air, Celtel Tanzania etc. Under non-probability sampling, snow-ball ( referral by primary respondents ) and self-selection ( invite engagement and roll up informations from those who respond ) are methods that will be used.


Brief description of the rating and analysis proposed for this undertaking.

( i.e. undertaking deliverables and hypothesis, correlativity trial etc )

This undertaking will be of great usage non merely to Tanzanian but besides to other African states since it is aimed at happening ways to heighten the development of SMEs in relation to Globalization. Second, theories by other SMEs who have succeeded to travel Global will be analyzed and will be proposed for application to profit the SMEs in Tanzania.

The expected consequences for this undertaking include ; Firstly ; With strengthened SME sections or debut of the Ministry of little medium endeavors, a batch of clip and money will be devoted to the sector therefore heightening the opportunities of Tanzanian SMEs to go Global participants. Second ; With high trade name consciousness, the merchandises of SMEs will be able to stand out in the international markets. Third ; With engagement in trade exhibitions such as Expolink, India belongings exhibition, East Africa International trade exhibition, SMEs can efficaciously market their merchandises overseas.


Illustration of how this undertaking will profit the hereafter employability

This thesis will assist increase cognition and understanding on SMEs. It will besides assist find what jobs are being faced by SMEs in Tanzania and what measurers can be taken to rectify them. Last but most significantly, this undertaking will assist happen a lucifer between theory and pattern and its application to the existent universe and will be a basic usher for all SMEs desiring to internationalise towards the economic systems.


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