Introduction on challenges facing small and medium enterprises in acquisition of goods in Tanzania.
This chapter introduces the background of the study, the statement of the problem, the objectives of the study, the research questions to guide the study, the significance of the study and the scope of the study.
Background to the study
Today many small and medium enterprises are facing a complex and competitive procurement environment than ever before. As competition intensifies due to changes in the industry structure and the emergence of new technologies, enterprises are determined to reduce their operational cost while enhancing their profitability (Usman, 2014).
Small and medium enterprises generally experience many challenges in their operations which are distinctive to a level affecting their growth and profits thus reducing their capability to contribute effectively to sustainable expansion.
challenges facing small and medium enterprises in acquisition of goods
A number of reasons as to why SME‟s failed included lack of proper management leading to poor strategic goals being put in place, unwillingness to adapt to rapid changing technology, failure to seek for advice and lack of commitment from top executives (Gelderman, 2008).
SME’s faced importation challenges right from the moment they negotiate for supply contracts, procure, do shipping until the final goods arrive in the importers business premises and this was as a result of challenges in the internal environment revolving around managerial skills, financial knowledge, lack of expertise in functional areas such as marketing and human resource management, Inadequate finance, high cost of credit, and lack of access to finances was a challenge faced by SME’s (Scott, 2012).
Businesses engaging in international imports faced more challenges as compared to those engaging in local trade (Dimitri, 2015). Some of the challenges in fore-front of enterprises in Mombasa (Kenya) included lack of support from the government, rapid changes in
technology, insufficient capital/funds, lack of proper training and experience, lack of knowledge and skills, lack of proper information pertaining the inadequate markets and the rules, regulations and policies to be adhered to be able to run and sustain these enterprises (Musau, 2015).
According to (Sounza, 2012) importation business in SME is distinctive in various aspects for instance sourcing of goods, modes of payment for goods and risks involved and the relationship amongst suppliers and importers amongst others. However, a number of small and medium business enterprises such as suppliers, contractors, consultants and service providers participate in the tenders not knowing all the requirements of the tender, most of them lack knowledge to that area (Brinders, 2013).
In today’s economy globally more attention and investment on procurement trough importation is on the rise due to the vicious competition in today’s global markets and the increased expectations from customers and all businesses engaging in importation ought to ensure that there is smooth supply of their goods right from procuring, shipping, inventory to distribution (Dimitri, 2015). The focal point of competition by enterprises offering homogeneous or standardized products is majorly on the supply chain end where efficiency and effectiveness determine whether one’s business succeeds or fails.
All countries have in place some customs controls for revenue generation, domestic economic interests, and national security purposes. While there are similarities between countries (like the universal need for shipment documentation, including commercial invoices and Bills of Lading) there are local, specific requirements that have to be addressed (Usman, 2014).
The port of Dar es Salaam is the preferred port that many importers from small and medium business enterprise or any other market rely to use for importation and exportation of goods for overseas, this port is faced with challenges of being able to only handle a certain small percentage of the incoming vessels (Sounza, 2012). Thus, goods will usually delay when they get to the port ready for offloading. Compared to counterpart ports in Asia and Europe that have implemented best in class technology, the port of Dar es Salaam receives limited goods that it can handle.
Statement of the Problem
challenges facing small and medium enterprises in acquisition of goods in Tanzania. This study aimed at assessing the challenges facing small and medium enterprises in acquisition of goods in Tanzania including all activities that pertain to acquire goods, works and services.
Scott, (2012) conducted a study on procurement measures applied by small and medium enterprises in acquisition of goods, founded that generally small and medium enterprises they faced various challenges in their operations as they face limited access to financing, high costs of funds and equipment, infrastructural inadequacies, low quality of manufactured goods, multiple taxes on manufacturing inputs and manufactured goods, inefficiencies of customs and ports administration.
Currently, Insufficient finances to import a whole container of goods were a challenge to most importers as they had to wait for other similar importers so that they could combine their goods to fill a container. This waiting time before shipment increases and consequently brings about gap in demand and supply in the market.
Problem challenges facing small and medium enterprises in acquisition of goods
Nowadays, enterprises are challenged by high importation costs like insurance fees for goods in transit, inward transportation costs, inspection fees, and import duties among others. Some of the SME’s also lacked adequate finances and had difficulties accessing credit facilities to support their businesses (Usman, 2014). Small and medium enterprises need help to improve their future sustainability so as to bring quality service to customer (Brinders, 2013).
Moreover, the conducted studies have discussed much if not only on the challenging factors hindering the small and medium enterprises in acquisition of goods, unfortunately the solutions to the problems was not well investigated, as the researcher in this study intends to bridge the knowledge gap left by these studies so as to come with solutions to challenging factors facing the small and medium enterprises in acquisition of goods in Tanzania.