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The challenges of Globalization on Small Medium Enterprises

description on project background. In the context of Tanzania, the majority of SMEs fall under the informal sector and engaging up to 4 people, in most cases family members or employing capital amounting up to Tshs.5.0 million / $3,235.83. (Tanzania chamber of commerce industry and Agriculture, 2007). “The SMEs cover non-farm economic activities mainly manufacturing, mining, commerce and services.” (Tanzania ministry of industry, trade and marketing, 2007).
It is easy to establish SMEs all over the world and in Tanzania in particular, since their requirements in terms of capital, technology, management and even utilities are not as demanding as it is the case for large enterprises. These enterprises are also established in rural settings and thus add value to agro products and at the same time facilitate the dispersal of enterprises.
“About one third of the GDP originates from SME sector. The sector has more than 1.7 Million businesses, engaging about 3 million people, who occupy about 20% of the total labour force. 92% of the annual school leavers (at all levels) in Tanzania are potentially absorbed by the SME sector. There are about 700,000 new entrants in the SME sector every year.” (Saiguran, 2007) Therefore it is reflected already that the SME sector plays a crucial role in the economy.
Some of the problems faced by SMEs in Tanzania include;
“SMEs constitute a higher credit risk because they often lack diversification in their sources of income and/or are concentrated relative to large firms, with the possible exception of SMEs oriented to the consumer segment (niche market). They also suffer from significant uncertainty regarding potential tax liabilities. There is no Opaqueness in balance sheets therefore reflecting weak accounting practices and non-transparent information.” (Tanzania chamber of commerce industry and Agriculture, 2007). All this results into banks being reluctant to lend them money as a result of low credit worthiness which leaves SMEs with limited access to finance.
A report from the (ministry on industry and trade in Tanzania, 2002) reports the following problems;
In addition, Business Development Services, namely services related to entrepreneurship, business training, marketing, technology development and information are underdeveloped and not readily available.
There is very weak demand for the products produced by SMEs arising from low and dwindling consumer purchasing power as well as competition that arises with similar imported products.
Then again, SME operators lack information as well as appreciation for such services and can hardly manage to pay for to pay for the services. As a result, operators of the sector have rather low skills. Also, there is no umbrella connection for SMEs. Simultaneously, the institutions and associations supporting SMEs are weak, fragmented and uncoordinated partly due to lack of clear guidance and policy for the development of the sector.
Distortionary regulations affecting SMEs (Unfavorable legal and regulatory framework). Tanzania is listed among the top 10 difficult countries to build a warehouse, it takes 12 procedures to register a property, ¾ of Tanzanian businesses complain of taxation administration (local and central), and it takes 13 procedures to start a business and 35 days long, at a cost of 161 percent income per capita. These all add up to high compliance costs which tend to reduce the resources needed for investment and high operational costs which results into high competitiveness of local domestic products both in internal and external markets.
Another problem is as far as the infrastructure is concerned, the roads are very bad thus affecting transport in a way that it makes it difficult and costly to move goods from one point to another within the country and adds up to costs. The power is also unreliable and unstable and can disrupt deadlines. Communication is undeveloped and costly. It is difficult to obtain network in rural areas thus affecting the business activities of SMEs and also affecting their cost of production.
A heavy cost of compliance resulting from their size is also one of the problems faced by SMEs. This is because they have limited resources (in terms of financial means and manpower). Their spending for market research and market entry take a much higher proportion of their total spending.
All in all, this project will be analyzing the importance of SMEs in Tanzania and evaluate their contribution to the country. The problems/ challenges in terms of growth, and their characteristics in relation to Globalization including those mentioned above will be analyzed. Various ways in which SMEs can grow to venture into global markets will be sought for their betterment and future enhancement in their businesses.
Brief description of project objectives. (i.e. scope of proposal, constructs used, limitations and significance) The objective of this project is to investigate the impact of Globalization on SMEs in Tanzania. These impacts can be both positive and negative. It will also evaluate the importance of SMEs in the Tanzanian economy. Secondly, would be to assess the challenges faced by SMEs due to Globalization. Thirdly, a review on existing Government promotion policies and strategies on the Tanzanian SMEs will be prepared. Lastly but not least, is to determine ways in which the SME’s in Tanzania can grow to become global players.
As for the limitations; for the questionnaires sent out, the responses may be limited. It would be very difficult to get the respondents to answer to the questionnaires. Another limitation would be in the selection of the sample. The sampling frame is very vast thus making it quite difficult to get the correct respondents for the interviews and questionnaires. As for the sample size which is about 100 people, the limitation is that the cost is relatively high especially when conducting long distance interviews over the phone. Lastly but not least, this research is limited to SMEs in Dar-es-Salaam so it may not be possible to generalize it to the whole of Tanzania.
The significance of this project is to look at the challenges of SMEs in Tanzania and use it as a prototype to other African countries. There is very limited research on SMEs in Tanzania and this project will contribute as a research paper. This project will also open the eyes of SMEs to growth and development in relation to Globalization.
Brief description of the models/theories/concepts that will be used in this proposal. (i.e. consumer behaviourism model, CSF and etc.) In this project some important internationalization models 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 reasons for the use of the eclectic paradigm. “Firstly the paradigm is based on the theories about multinational enterprises. Secondly, the model can be used to explain all types of foreign direct investment (FDI). And lastly, and most importantly, the model embraces all the three ways in which a firm can engage in foreign activities, i.e. foreign direct investment, trade, and contractual resource transfers, e.g. licensing, technical assistance or management and franchising agreements. Moreover, the model makes it possible to predict which route will be preferred.” (Bulcke, 2003)
According to (Porter, 1998) he designed a diamond shaped basis of a framework to illustrate the determinants of national advantage. This diamond illustrates the national playing field that countries establish for their industries. Porters Diamond will be used to demonstrate the factors of competitive advantage for SMEs in Tanzania.
The theory of marginal industry dilation is an important foreign direct investment theory to developing countries. Its connotation fits for the true situation of countries middle and small size enterprises. SMEs could use this theory as a direction thus helping them go abroad bravely and develop multinational management. The expansive environment and ardent competition will develop SMEs and prepare them to face the challenge of the economic globalization. (Free papers, 2006)
Academic research being carried out and other information, techniques being learnt. (i.e. literature – what are the names of books you are going to read / data sets you are going to use) The books used will mostly talk about Globalization, the African economy, Internationalization.
Journals, articles, and magazines will also be referred to.
Some of the references include the following:
Articles Bulcke, 2003, Internationalization towards China after its Accession to the WTO, Katholieke Universiteit Leuven, Departement Oosterse

Strengths Of Tanzanias Economy And Human Resources Economics Essay

Human resource is also defined as the way of managing people through a strategic and logical approach. Human resources in an organisation are the key drivers for the success and prosperity of the organisation. The influence of globalisation and technology makes today’s organisations ever changing and therefore human resources is very important in order to maximise organisational effectiveness and maximise potential profits.
Tanzania has a strong and competitive economy through several sectors such as the agricultural sectors which is the main economic activity of the majority. In terms of economic categorization the Tanzanian economy is that of a developing country as distinct from a developed economy like that of the United Kingdom which is basically industrial. Like any other developing economy, the Tanzanian economy has its strengths and weaknesses.
Tanzania has a huge arable land compared to the other countries in the East African economic sub region. It is politically stable and socially peaceful with potential agricultural economy. The enlarged East African common market is a plus to the growth of the Tanzanian economy. The huge arable land makes Tanzania potentially strong in agricultural production of both food and non food agricultural products. The country is a large exporter of coffee, tea, sisal, cotton, cashew nuts and oil seeds for example sunflower. The large land mass of the Tanzanian economy permits growth of a large livestock industry. Tanzania is among the ten top countries in Africa with potential livestock farming and development. Moreover Tanzanian economy is also rich in forestry reserves a phenomenon that permits development of a viable wood industry. All assortments of minerals both metallic and non metallic minerals are found in Tanzania in large quantities. To mention a few are Uranium, gold, lead, tin, iron and non metallic minerals like diamonds, gemstones like Tanzanite and other precious minerals.
Growth of labour force.
The growth of labour force in Tanzania has grown compared to the early 1990’s. “The formally educated workforce is small in number and is concentrated in urban areas. In gross terms, an estimated 500,000 – 600,000 new entrants join the labour market each year, most of whom are the youth” Tanzania government website . The youth activeness has created a rapid growth of labour market in Tanzania.
The Indian Ocean that borders Tanzania in the east has a huge potential for the development of a viable fishing industry. Countries such as Japan and China have licensed fishing vessels in the Tanzania waters. Fishing has grown to a large extent which is a means of earning a living.
Tourism has been a major factor for economic and financial boost towards the growth and prosperity of Tanzanias economy. Tanzania is a country with abundant natural animal species in national Parks such as Serengeti, Manyara, Ruaha and Ngorongoro crater. The country attracts tourists from different countries which is now a potential tourist industry and important to the country’s economy. Tourists visit Tanzania from different parts of the world such as America, Britain, Australia, New Zealand and many more which also add up in the prosperity of the foreign currency.
Weaknesses. Despite all the advantages of the strength of Tanzania’s economy as described above, the economy is beset with many weaknesses as detailed below:
Technological backwardness. As a consequence of the said technological backwardness, Tanzania depends on imported technology for the development of its economic sectors and employing foreign experts in other specialized sectors that is in industrial, mineral and health areas. The country is large and need massive investment in infrastructure development such as roads, airports and ports.
Demography and poor environmental issues. There are several poor environmental conditions facing the growth economy in Tanzania at large. Demography is a major factor that affects the economy of Tanzania as there is a high rate of dependency. There are other weaknesses facing the economy of Tanzania such as unemployment, health issues, poor infrastructure, recruitment and several other problems.
HUMAN RESOURCE ISSUES THAT EMERGE FROM THE STRENGTH AND WEAKNESS OF TANZANIAS ECONOMY. RECRUITMENT. Recruitment is a major aspect in relation with human resource management. The recruitment aspect in Tanzania is highly based on the qualifications especially in terms of education. For instance not every individual can attain a good position in the public and private sectors. In Tanzania education takes its lead for securing a good paying job that is the reason a large number of individuals are unemployed due to a high level of illiteracy rate. ” The scope of job creation in the formal public sector is limited. In contrast, economic reforms have shown positive effects on growth in the formal private sector. These reforms need to be continued to enhance faster growth” In Tanzania to be recruited in the public or private sector is not easy at all for people with low level of education for instance in the BANK OF TANZANIA which is a public sector they only recruit graduates for higher positions.
SELECTION. Selection process in Tanzania differs from one organisation to another for instance the Bank Of Tanzania operates an efficient system of selection process which helps the organisation secure the best candidate for the job. The Bank of Tanzania (BOT) conducts job fairs and direct recruitment, then through screening process favourable candidates are determined according to their skills, experience and education level. Thereafter potential candidates are invited to a formal face to face interview and within the interview they are assessed according to their skills and experiences through tests. After the interview references are checked and assessed. Candidates who satisfy the board are then invited for seminars where they are informed on all rules and regulations of the contract and the best candidates are then selected.
TRAINING AND DEVELOPMENT. Training and development is very important in the management of human resources. Training and development helps to increase employees performance and motivation. Many organisations in Tanzania conduct different trainings and development programmes that helps to strengthen their organisations and meet their goals and targets. Tanzania Institute Of Bankers (TIOB) is an example of an organisation which has several kinds of training such as health and safety, stress management, career planning and development, time management, employee relations and many more.
EMPLOYEE BENEFITS. Any organisation which focuses on the employee benefits is always on the right path as employees are the solid foundation for the growth and prosperity of an organisation. With reference to Bank of Tanzania which is a public organisation it has several kinds of benefits packages such as bonuses, increase in wages, career development, incentives, healthcare, medical care and many more.
EQUAL EMPLOYMENT OPPORTUNITY. Tanzania as a country supports the equal employment act and it is the obligation of all organisations to abide to the laws of the nation. The issue of equal employment opportunities is a universal matter where as it is practices all over the world. The Tanzanian government has increased women’s access to education so as to loosen the gap between men and women in education sector that leads to the employment sector. The government of Tanzania has increased the percentage rate of girls entrance to higher education institutions so as to give them a chance of equal employment afterwards. Moreover men and women who work in the private sectors have the same level of equal employment opportunities.
MANAGEMENT OF HUMAN RESOURCE. The management of human resource in Tanzania follows all the necessary human resource planning and strategies that helps to manage the organisations at large. With reference to the Government of Tanzania it is very much conscious on the management of human resources as it works towards the improvement of people’s welfare, development of rural areas, reduce the high level of illiteracy rates and create job opportunities for the Tanzanian majority.
LACK OF QUALIFIED PERSONNEL. The economy essentially suffers from technological backwardness and lack of adequate professionals, qualified personnel in various sectors of the economy. Qualified personnel’s are quite important in the context of human resource management. Tanzania faces a great challenge in having adequate qualified personnel’s in different sectors such as engineering, education and health sectors. For Tanzania to eradicate these problems the following aspects should be taken into account so as to manage the human resources effectively:
The strengths and weaknesses of the Tanzanian economy explained above has serious implications on the planning and conduct of the education system as a whole in order to have adequate personnel to manage the economy in all sectors.
All government ministries, departments and the private sector involved in the educational sector must develop short, medium and long term educational plans that would address the short, medium and long term manpower requirements of the economy. More agricultural experts are needed, Doctors for health sector, Engineers for construction and infrastructure development. Colleges and Higher learning institutions need to be staffed with appropriate teaching personnel to deliver the needed trained people. In this case teaching staff that are qualified in each relevant field are to be deployed from primary education to university level to fulfill the need of the Tanzania economy and development.
To address adequately the problem of technological development the government must make available adequate funds for the training of experts, scientists and technicians. In the absence of scientists, engineers and technicians in adequate number there is no way the Tanzanian economy can eradicate the problem of technological backwardness. Educated labour force in all sectors of the economy necessary for the economic growth.
CONCLUSION. Human resource management is a very important sector in any business sector. As it is the management of humans in a logical manner therefore it has to be managed effectively. With reference to the strength and weaknesses of the economy of Tanzania there are several human resource issues which emerge such as the recruitment process, selection process, training and development, equal employment opportunities and other factors. As seen from different organisations such as the Bank of Tanzania, the Government of Tanzania and Tanzania Institute of Bankers human resource management is very important for the growth of their organisations.