The Current Situation Facing Tanzania Smes Economics Essay

The original Situation Facing Tanzania Smes Economics EssayI sincerely give thanks the almighty God to keep me health and give me ability, strength to earn this course, as he makes up turnivities run and deciding the degree of victory or failure unmatchable kindle experience.Special thanks to my Instructor, Mrs. Priti Punatar for her direction and dungeon in this act two to a fault which need more than guidance as we give out our view in elect abstractic, Madame your c lose guidance has snuff it in truth helpful on this session, convey so much.Thanks a draw Institute for schooling Technology and Greenwich University for providing us with Inter topic qualification locally (here in Tanzania).ABSTRACTThis paper has examined the up-to-the-minute situation facing Tanzania SMEs and how does they pass away with and through foundationing in this earned run average of worldwideization. The paper in like manner discussed challenge prevailing in ripening and incr eternal sleep of Tanzania SMEs, as late 70s and early 80s SMEs started to become much than innovative and much on the table in endpoint of reducing costs, Thus, they started providing intermediate keens to a greater ut about efficiently than handsome enterprises, as pack starts to be more aw ar and more skilled on business organization surroundings through stinting integrations, suit of people and capital which holdd by globalisation. While Tanzania SMEs tries to survive by innovation in globalization era engineering, competition and their abrupt bankruptcy become a exact challenge which this paper will analyses and give the recommendation on how to go about it so as to survive in this era which other developing countries like China, India and Brazil took as luck to stabilize they economy.1. ANALYSIS ON IMPORTANT OF GLOBALIZATION IN TODAYS dividing line of creditWORLDAs globalization is integration and inter dependances of world economies, this cause relaxation behavior of world(prenominal) condescension as peck barriers where removed, engineering science progress spokesperson uses of internet which make customers more accession to product of antithetical countries and allows ease sectionnership amongst entrepreneurs.Through finding which collected on cooking of essay whiz, globalization quite a little be contri however whened by the pastime factors in this recent decadeIncrease in and expansion of engine room,Liberalization of cross-border trade and resource military campaigns,Development of go that support remote business,Growing consumer pressures,increase global competition,Changing political situations,Expanded cross-national cooperation.Also globalization brought different challenge in todays business environment, among those issues there business integration, creativity, movement of technology, movement of intangible and tangible resources.Throughout recorder of history, human contact all over ever wider geographic nati ons shit expanded the variety of resources, products, services, and commercializes usable to consumers. concourse has altered the elan they wants and expect to live, and they keep back become more deeply stir (positively and negatively) by conditions outside of our immediate domains (Daniels J.D, et al, 2009, pg48)This global challenge which portray all sector in addition effects Tanzania economic as governing body implemented Tanzania economic reform programme in 1986 and review in 1996 which base on philosophy of dedicate country economy in grocery store economy whereby the private sector will take threesome in creating income and employment, while SMEs was accounted for a large shargon of the enterprises active in Tanzania.1. I.MAJOR CRITICISMS OF GLOBALIZATIONAlthough we fuddle discussed seven broad reasons for the increase in external business and globalization, we should remember that the consequences of these trends remain controversial. To thwart the globalizati on process, anti-globalization forces regularly objection international conferences (sometimes with at unravelant violence). at that place atomic number 18 galore(postnominal) pertinent issues, exactly we focus on the three broad categories threats to national sovereignty (i.e. countries lose sovereignty), growth and environmental filter (I.e. the exitant growth hurts the environment), and growing income dis play offment (i.e. some people lose some(prenominal) relatively and absolutely).Threats to national sovereigntyYou probably heard the slogan Think globally acts locally. In essence, it instrument that the accommodation of local interest should prevail over global interests. whatever observers worry that the proliferation of international agreements, particularly those that eliminate local restrictions on how good argon bought and sold, will diminishing a nations sovereignty- that is, a nations freedom to act locally and without externally im deliverd restrictions.Eco nomic growth and environmental stressMuch anti-globalization criticisms revolve around issues of economic growth. According to one argument, as globalization brings growth, it consumes more nonrenewable natural resources and increases environmental damage- despoliation through toxic and pesticide runoffs into rivers and oceans, air pollution from factories and vehicle emissions, and deforestation that tummy affect weather and climate.Growing income ine tonusIn measuring economic fountainhead- cosmos, we essential look not only at our absolute situations but also at how well were doing comp ard to the economic well-being of others. We generally dont find our economic status satisfactory unless were doing break-dance and keeping up with others.Also Tanzania make outgrowth Vision that by the year 2025, Tanzania should have constraind a strong, diversified, flexible and competitive economy, which arouse effectively cope with the challenges of development and, which can also easily and confidently adapt to the changing merchandise and technological conditions in the regional and global economy.2. BARRIERS HINDERING TANZANIAN SMEs TO COMPETE GLOBALLYThe following are suggested to be the barriers impending Tanzanian SMEs to expand beyond inwrought merchandises.2. I.Ability to pick out pecuniary capitalOn recognition of the fact that many SMEs in Tanzania do not have ability to acquire monetary capital, the organisation has given out a total of 4.85bn/= in loans to 14,272 for the financial year ending 2003/2004 as a support to teensy and strong suit scale entrepreneurs development projects (URT, 2004).which wasnt enough.2. II.Legal and regulatory textileReport from Business surroundings Strengthening for Tanzania (BEST) revealed that, the government has been working in collaboration with a do of ministries and department to put in place a legal framework conducive to speedy investments, streamlining and registration of business activities. (Daily News, July 9, 2005).but in fact these institutes create bureaucracy and hinder the growth and development of SMEs in the country, through colossal process of business registration.2. III.Incoherence of government policies for SMEs developmentOn recognition of SMEs growth potentials, the government of Tanzania has been implementing the Small and Medium Enterprise Development insurance policy (2003) to support the development of SME sector. save the policy aimed more at increasing the ploughshare of the Gross National Product and merchandise earnings as well as winning the war against poverty. (Sunday observer June 26, 2005)2. VI. lose of managerial skillsResearch make by Gibb, (1983) revealed that, Small industry in a large second of observed developing countries demonstrate a multiple of specific and in many ways non-conventional managerial traits that one seldom encounters in fair or large theatres.First is the very weeny management group that brings a recollective wi th it a lack of specialization, a predominance of multi-functional roles, a famine of promotable manpower, and a pronounced domination by a leader and large measure of informal control? Second, there is the hold backed control of the environment and the limited resources available to scan its anticipated potential channels and adapt efficiency accordingly. Third, there is the informal pattern of operation, with conflicts resolved more easily and loyalties anticipate a high magnitude. Fourth there is the general un awareness or indifference to the structured approach to the managerial function and the need for a longer term vision of the enterprise and its environment.2. V.The environmental influenceSmall businesses, especially, are struggling nationally and internationally to survive. For an brass instrument to survive and expand there is need for an understanding and adjustment to the external environment. Lack of solution to the changing global environment will conduct in the organizations not construeing the needs and wants of their stakeholders. Responding to the environment essentially means matching the capabilities of the organization with changing environment. This scenario has meant that the success of SMEs in this changing environment of globalization depends in large part on the facial expression and implementation of strategy.(e.g. Miles and Snow, 1978 Porter, 1980).Strategy in this context reflects the firms short- and long-term responses to the challenges and opportunities posed by the business environment. Companies execute strategies to commit customers, meet the needs of the stakeholders and deal effectively with other environmental concerns, such(prenominal) as environmental issues.ExampleGlobalization has generated competition even more competition for the SMEs particularly the black African business. The growth in ethnical groups in many advanced economies poses particular challenges for global merchandise strategies. In the U K an increasing ethnic diversity of commercialiseplaces is attributed, in part, to an increased mobility of populations across national frontiers and a corresponding growth in ethnic consumers(Wilkinson and Cheng, 1997 Nwankwo and Lindridge, 1998).2. VI.Limited experience of international trading activitySmaller firms find that the global marketplace can offer tremendous hazard for business growth and development (Winch and Bianchi, 2006). stock-still the benefits (on both on a firm and macro-environment level) to be derived from international trade (Bell, 1997), this body of belles-lettres also argues that the little the firm is a good deal more vulnerable to barriers associated with resource limitations, operating difficulties and trade restrictions (Katsikeas and Morgan, 1994 Leonidou, 2004). As Buckley (1989) maintains, internationalization by its very nature involves a high degree of risk and SMEs tend to have more limited resources to cope with the d haveside of remote expansion. Hence, it has been argued that the barriers to entry that limit international expansion are systematically higher for smaller firms than for larger firms (Acs et al., 1997 OFarrell and Wood, 1998).It has been highlighted by Bell (1997) that the close widely investigated topic in the literature is the barriers and obstacles to merchandiseing, which have been categorised in terms of internal and external barriers. immaterial obstacles to SME internationalization include procedural, governmental and task barriers (Leonidou, 2004), which may emanate from the national market or overseas market (Fillis, 2001). For small firms, the prospect of get in into international markets can often be seen as a uncertain venture (Burpitt and Rondinelli, 2000 Masurel, 2001) especially given financial market imperfections, exchange rates, and differences in legal systems, culture and languages (Acs et al., 1997). Therefore, as the research findings by Knight and Liesch (2003) ackno wledged, SMEs are more often less able to sustain competitive threats and disapproving macro-events in the external environment than larger firms. This is particularly characteristic of SMEs with very limited experience of international trading activity defined as tentative internationalizing firms (Lloyd-Reason and Mughan, 2003). For these SMEs at the early stage of internationalization, more often the internal skills and knowledge needs of the firm have been met and all is required is market intelligence to richly engage in foreign market expansion.2. VII.Export capabilities and exporting performanceOver two decades, many studies have researched the specific elements of export content that may determine export performance in SMEs. Unfortunately, much of this was fragmented. Indeed, reviews by Aaby and Slater (1989), Styles and ambler (1994), Leonidou (1995), Fraering (1996) and Zou and Stan (1998) all recognize the need to unite empirical export research. Amongst these autho rs there is general agreement that the elements of export mental ability relating to export performance centre around three categories(a) a firms characteristics(b) a firms competencies and(c) a firms export-marketing strategy capability.(a). Firms CharacteristicsOne of the reasons the activities of SMEs in international markets are seen to merit special attention is the challenge SMEs with limited resources face when competing in such markets. It is perhaps unsurprising, therefore, to find that research (Dichtl et al., 1990) did establish tie ins between firm size and export performance. However, a number of other studies have questioned the creation of such a direct link. Bonaccorsi (1992), Katsikeas et al. (1997) argued that firms with the same amount and flavour of resources may well choose different export strategies and thence strategic capability moldiness be a mediating variable in the relationship between a firms resources and export behavior, and not firm size. Large r firms achieved a better competitive position than smaller firms when they had greater marketing capabilities and product superiority. Katsikeas et al. (1997) ensnare that the level of export involvement and the type of product marketed were perceived to be more important elements of capability than the size of the firm. Thus, it seems that, whilst it may be an unambiguous explanatory factor in export success, size is not inescapably viewed as a key export capability.(b). Firms competenciesCompetencies that have been directly associated with export success include home(prenominal) market performance, product uniqueness, production capacity, exertion skills and the type of industry in which the firm operates. Ogbeuhi and Longfellow (1994) and Katsikeas et al. (1997) both make theatrical role to factors such as, export market planning skills, quality of export staff, foreign market connections and financial management skills as being critical capabilities in enhancing export pe rformance.Aaby and Slater (1989) propose that competencies in all these areas are critical to export success. Conversely, weakness in these areas is seen as a potential cause of failure in export markets. More specifically, Ogbeuhi and Longfellow (1994) found that export market failure often results from poor market synopsis, absence of product market match, ineffective distribution, and lack of management planning and control.(c). Strategy variablesMuch of the before work examining strategy variables focused on individual capabilities product design and persistence in the market. However, more recent research has put greater emphasis on the learning generating capabilities of the firm. Toften and Olsen (2003), Burridge and Bradshaw (2001) and Hart and Tzokas (1999) suggest that successful exporters have strong capabilities in accessing and using the information required for long term export marketing planning, whereas less successful ones put the emphasis purely on obtaining in formation for the day-to-day running of the business. This is supported to some extent by Johanson and Vahlne (1977) who conclude that, whilst firms may initially export to markets that are geographically close, it is the subsequent increase in market knowledge and information that can lead to rapid expansion in more psychically outback(a) markets.Other authors have also provided empirical evidence of the importance of marketing variables in relation to export performance (see for example Shoham et al. (2002), Thirkell and Day (1998), Madsen (1994), Styles and Ambler (1994), Katsikeas et al. (1996). Admittedly, the weight of support for the role of relationships in export performance comes principally from the network perspective, a view that focuses on the formal and informal relationships that prevail an organisation (Johanson and Mattsson, 1988). One of the main tenets of this perspective is that export performance is the result of interaction and the development of numerous r elationships (Johanson and Vahlne, 1990).3. OPPORTUNITIES AVAILABLE FOR SMALL AND MEDIUM ENTERPRISES TO nail BEYOND DOMESTIC MARKETScarborough et.al, (1996) suggested that growing number of SMEs are recognizing that pass global is not only a strategy reserved wholly for large industries, but increasing globalization of business also favors SMEs. There are several opportunities available for SMEs pursuing a Global movement these are3. I. Direct exportingExporting starts with a global bear in mind pin down which unfortunately is not all that common among owners of SMEs. With increased global competition putting pressure on domestic market, and trade agreements spread up foreign market, as never before, however, SMEs are increasingly facial expression towards exporting.However, SMEs, realizing the incredible profit potential it offers, are making exporting an ever-expanding part of the marketing plans.3. II. Use of internet technology to penetrate across lodger marketThe Intern et is a worldwide network of interconnected computers consisting of thousands of smaller networks. The worldwide website (WWW) is an information retrieval system that operates on the Internet (Ndiaye et al 2000) organizations have been increasingly deploying internet to serve their business process needs. existence an information rich network, internet provides further opportunity of creating knowledge to SMEs. This is an property that stakeholders in SMEs can communicate with the outside world to add pass judgment to their processes (Mwaijonga, 1999). Once connected to Internet SMEs can create their own website and thus become more accessible to the rest of the world (www, digital dividend .org)3. III. internationalist franchisingFranchise is license granted to manufactures, distributor, trader, etc, that allows him or her to manufacture or cheat product or service in a particular area for specific period of time .The grantor of license (Franchiser) is usually paid a royalty o n gross sales by the holder of the license. The situation of domestic market is the principle driving force pushing entrepreneurs into foreign markets. In many cases the products and services sold in International markets are equal to those sold in home country. However, Franchisers have learned to modify their products and services to suit local tastes and customers.3. Vii. Foreign licensingSMEs enter foreign markets by licensing businesses in other nations to use their patents, trademarks copyrights, and technology is a relatively simple way for even the most in undergo business owner to fly the coop his reach into global markets.3. V. Formation of alliances and joint venturesMelanie, Ravi (2002) adds that in order for SMEs to survive in markets where there are large competitors, they can form alliances with connatural firms to increase the rate of market penetration and reduce financial risk, by this way, the SMEs may utilize overseas technology to overcome diseconomies of s cale and to bring out innovations which differentiate themselves significantly from large competitors. Because SMEs have limited resources and relative unfitness to absorbing the costs of the operations, Most importantly they can benefit market reputation that a foreign partner is enjoying, thus this create opportunity for SMEs to go beyond domestic market.3. Vi. Credit guarantee scheme for SMEsPerege (2005) indicates that, the long awaited credit Guarantee scheme for small and medium enterprises set up by the government of Tanzania to help SMEs access foreign a market is now ready. Exporters from the SMEs sector can now start displace their application for funding through the Small Industries Development Organization (SIDO).The fund, which amounts to Tanzanian shillings 3 Billion as set up in the forward financial budget 2003/2004) with the purpose of assisting small and medium enterprises expand exports of their products. low the credit Guarantee scheme, once an exporter has a pplied for the loan from any banking unveiling and has been asked to produce guarantee/ collateral for that affect, SIDO in collaboration with BOT, will prize the possibility for acting as warrantors .In case exporters failed to pay back their loans, the guarantor would pay the loans (Perege, 2005).3. Vii. Unique goods or servicesSome SMEs have products that are superior in quality than what is currently offered in the targeted International market. This helps the SMEs gain an edge in attracting buyers and quickly establishing a market position. Many overlord SMEs now are finding that they have an opportunity to establish market positions worldwide because they have specific expertise that is in strong demand.4. shine OF INNOVATION IN GROWTH AND DEVELOPMENT OF SMES IN TANZANIA.Combining the concepts provided in previous studies on the first essay, a scattering wayl can be good to Tanzania SMEs as it emphasizing acquisition, adoption and adaptation of already existing innovati ons has been developed for the SMEs industrial sector. The focus of the research in this mode is on utilizing the entrepreneurial characteristics and capabilities to access and exploit already existing technology.Information and knowledge about sources of technology are important components in diffusion process. For a successful innovation in a competitive market, integration of SME activities both vertically and horizontally is essential. The model contains concepts (constructs) whose existence and possible relationships have been addressed and gauged in order to determine how they influence innovativeness. The constructs are categorized as(a) Technological information and knowledge(b) Knowledge and skills(c) Nature of the market and external relationships(d) Characteristics and capabilities of SMEs.4. I.MEASUREMENTS OF INNOVATIVENESSTo measure innovativeness of SMEs in the Tanzanian manufacturing sector, a time-frame of three days was used. This time-frame was selected because of the nature of the measurements used required owners/managers of SMEs to provide accurate estimates of their innovativeness. Technological change that was selected as the innovativeness indicator of technology adopted was measured as it was experienced by owners/managers of SMEs.Innovation measurement is based on technological adoption, modifications and incremental changes that took place in the SMEs in the Tanzanian manufacturing sector. This approach is in line with a study by Landa (1993), in which he was able to say innovating from non-innovating firms.4. I.1.Measurements of Innovation Indicators(a) Technological information and knowledge this concept is dual-lane into technology information access and technology knowledge awareness.(b) Knowledge and skills this concept is divided into two concepts level of knowledge and skills, and owner.5. ANALYSIS OF THE ESSAY FUNDINGSThis part includes the compend of findings regarding the essay and the concluding remarks and recommendati ons.5. I. Markets for SMEsDifferent researchers were interested to establish whether Tanzanian SMEs sales their products in the external markets, local market or both.According to the research on the barriers hindering Tanzanian SMEs to expand beyond domestic markets, do by Neema J.M. (2010), the findings doom that (61.11%) of entrepreneurs (or businessmen) sale their products in local market and only (38.89%) of businessmen sale both local and external market. This suggests that the local market looks friendly to the SMEs than external market.It is observed that, export modes in Tanzania differ from one firm to another. After trade liberalization, many entrepreneurs have started to export into foreign markets freely instead of using the traditional government channels. (Argument from the essay writer, 2011).It is revealed that, most SMEs which use this method do it in the first place by participating in neighbors countries though trade fairs, exhibitions and delegation. However, direct exporting has been possible due to mainly initiatives from buyers most of these SMEs have their customers abroad who use their product (Argument from the essay writer, 2011).5. II. Lack of external marketing informationOn the other hand the findings show that they suffer from lack of external marketing information. They are often otiose to keep track of trend with changing tastes and preferences of external consumers. Also most of SMEs they are not using website to penetrate beyond domestic market. This result in them losing either existing market share or being unable to penetrate new market without proper assistance from government and other institutions. It is also observed that, inadequate marketing services have been hindering SMEs find it difficult to obtain relevant knowledge and information about markets (Argument from essay writer, 2011).5. III. Lack of advanced technologyAccording to the analysis on this essay, it is revealed that technology constitutes the major constraints for the SMEs to inter into foreign markets. Entrepreneurs and other businessmen have a belief that due to the use of traditional technology in manufacturing of products, SMEs produce low quality products that do not meet international standards. This is also a view held by UNIDO, which establishes that small-scale businesses often use inefficient low-cost technologies that yield products of poor quality and pose hazards to health and environment.A number of small-scale business strongly agree that they get difficulties to cope with external market competition because of low quality products and high prices for the products manufactured by SMEs compared with products of other countries like China, Japan, and Kenya, etc.6. conclusion6. I. Conclusion on Global PerspectiveThe endless global trends are unseeingly affecting all businesses throughout this economy. These global trends cause a never-ending need to accommodate, which is applying more costs and frustration to al l businesses. The global affects that people who are unaware of what is slowly bringing down businesses in this economy.along with tending to the extra costs incurred from globalization, businesses still have to focus on fulfilling customers expectations in order to improve satisfaction and increase future business. Outsourcing of technologies and continuous innovations opens doors for many businesses to gain access in a foreign market, but not all businesses can handle and maintain activity in these roughing economies.6. II. Conclusion on Africa PerspectiveOne of the weaknesses of African countries is the relative small size of the industrial sector.This sector is crucial for development and science and technology policies must support its growth and strengthening. The sector may be the weakest link in the development of many African countries. Hence the priority must be accorded to the development of this sector through building entrepreneurial capacities to acquire and apply sus pend manufacturing technology for enhanced competitiveness. Priority must also be accorded to the creation and development of small and medium sized enterprises (SMEs). intelligence and technology policies must support this orientation.6. III. Conclusion on Tanzania PerspectiveThis essay is about analyses the Impact of innovation in todays Tanzania SMEs in this era of globalization significantly there is a lot reveal that there are some opportunities for Tanzania SMEs to enter in foreign markets that have not been fully exploited because of some constraints as identified above, as many SMEs are unaware of opportunities currently offered by commercial banks to support their businesses.Lack of access to finance can usually be found at the top of any list of the problem of small business. SMEs generally start with their own resources and are undercapitalized. SMEs in Tanzania suffer from lack of information on available support and market signals, including those for local and export markets, lack of managerial skills and international marketing skills, lack of coherent government policies for SMEs development inhibits expansion of SMEs both domestically and beyond domestic market. Products of most Tanzania SMEs are of varying quality and costly to produce due to lack of access to technology and know-how.7. I. passport FOR POLICY MAKERSThe formulation, as well as the implementation, of a clear development policy on SMEs is of paramount importance given the contributions of SMES to economic and industrial development.The use of obsolete technology in Tanzania SMEs and a lack of awareness of source of new technology as the result of heavy dependence on foreign technologies, lack of innovations and lack of know where to find appropriate technologies to be acquired, and lack of internal capacity to achieve technical innovation. But innovation diffusion depends, among other things, on the economy and government of a nation (Silveira, 2001).This essay suggests the imp ortance of having a national innovation policy that links together all the economic factors. This is considered particularly important for Tanzania SMEs because of market failure, international competitiveness, and institutional inadequacies.7. II. Recommendation to Tanzania chamber of commerce industry and husbandry (TCCIA)It should emphasize on advocacy and lobbying. Thats representing the opinions of their members to the government and keeping and assisting in the formulation of policies concerning business so as to meet needs and concerns of their members so that they can grow easily and expand their business locally and externally.7. III. Recommendations for further studiesIt is recommended that government should create a passage of law and regulations that allow the SMEs to access the financial aids and the shortest way to get loans from development and Banks.The management capacity is one of essential factor to get success of the national development. Training for business managers is very necessary because they decide the fate of enterprises.One of the most difficulties of SMEs is lack of information and connection this is more serious for SMEs to access domestic and foreign markets.The government should provide information about domestic and foreign markets through establishing information centers that can play a connection between SMEs and tie in sectors or organizations.