Professional Documents
Culture Documents
AYANTU Propsl
AYANTU Propsl
ETHOPIA
COLLAGE OF BUSINESS
ANDECONOMICS
DEPARTEMENT OF;
BUSINESS ADIMINSTRATION AND
INFORMATION SYSTEM
INVESTIGATION OF CHALLENGES AND OPPORTUNITIES OF MICRO AND SMALL
SCALE BUSINESS ENTERPRISES DEVELOPMENT(IN CASE OF BULE HORA
TOWN)
PERPERD BY;
2.TEMESGEN BIRHAN................................3689/13
DECLARETION
Undersigned declare that this study entitled as the Investigation of Challenges And Opportunities of
Micro and Small Scale Enterprise Development In Case Bule Hora Town is my our own work. We have
carried out the research work independently with the guidance and support of research advisor. Mr
KENBON. A
TABLE OF CONTENTS
INVESTIGATION OF CHALLENGES AND OPPORTUNITIES OF MICRO AND SMALL SCALE BUSINESS
ENTERPRISES DEVELOPMENT(IN CASE OF BULE HORA TOWN)..............................................................1
A RESEARCH PAPER SUBMITTED TO DEPARTMENT OF BUSINESINESS ADIMINSTRATION AND IN
FORMATION SYSTEM IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF
BACHELOR OF ART(BA) BUSINESS ADIMINESTRATION AND INFORMATION SYSTEM IN........................1
...................................................................................................................................................................1
Acknowledgement.......................................................................................................................................5
Abstract
Contents
INVESTIGATION OF CHALLENGES AND OPPORTUNITIES OF MICRO AND SMALL SCALE BUSINESS
ENTERPRISES DEVELOPMENT(IN CASE OF BULE HORA TOWN)..............................................................1
A RESEARCH PAPER SUBMITTED TO DEPARTMENT OF BUSINESINESS ADIMINSTRATION AND IN
FORMATION SYSTEM IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF
BACHELOR OF ART(BA) BUSINESS ADIMINESTRATION AND INFORMATION SYSTEM IN........................1
...................................................................................................................................................................1
Acknowledgement.......................................................................................................................................3
Abstract.......................................................................................................................................................4
CHAPTER ONE..............................................................................................................................................5
1.1 Background of the study....................................................................................................................5
1.2 statements of the problem................................................................................................................6
1.4 Objective of the study........................................................................................................................6
1.4.1 General objective......................................................................................................................6
1.4.2 Specific objectives..............................................................................................................................7
1.5 Limitations of the study.........................................................................................................................7
1.5.1 Scope of the study..............................................................................................................................7
1.6 Significance of the study........................................................................................................................7
CHAPTER TWO.............................................................................................................................................8
Review Related To Literature.....................................................................................................................8
2.1. Introduction..........................................................................................................................................8
2.2. Definition and concept of micro small scale business enterprise.........................................................9
2.3. Role of small business enterprise in the economy................................................................................9
2.4. Small business success factors..............................................................................................................9
2.4.1. Knowledge customers and market..................................................................................................10
2.4.2. Innovation.......................................................................................................................................11
2.4.3. The Industry.....................................................................................................................................11
2.5. Sources and Access to finance by MSE sectors...................................................................................11
2.6. Challenges of small scale business enterprise....................................................................................13
2.7. Reason way small business fail...........................................................................................................15
2.7.1. Lack of entrepreneurial and managerial skill...................................................................................15
2.7.2. Poor Accounting..............................................................................................................................15
2.7.3. Operational in efficiencies...............................................................................................................15
2.7.4. The lack of a succession plan...........................................................................................................15
2.7.5. Lack of access to capital...................................................................................................................15
2.8. Approaches to study the challenges of SME.......................................................................................16
2.9. Opportunities of small scale enterprise..............................................................................................16
CHAPTER THREE........................................................................................................................................17
3. Research Method..................................................................................................................................17
3.1 Research Design..................................................................................................................................17
3.2 Method of data collection...................................................................................................................17
3.3 Target population................................................................................................................................18
3.4 Sampling Techniques and sample size.................................................................................................18
Reference..................................................................................................................................................23
CHAPTER ONE
1.1 Background of the study
1.2 statements of the problem
1.4 Objective of the study
1.4.1 General objective
1.4.2 Specific objectives
1.5 Limitations of the study
1.5.1 Scope of the study
1.6 Significance of the study
CHAPTER TWO
Review Related To Literature
2.1. Introduction
2.2. Definition and concept of micro small scale business enterprise
2.3. Role of small business enterprise in the economy
2.4. Small business success factors
2.4.1. Knowledge customers and market
2.4.2. Innovation
2.4.3. The Industry
2.5. Sources and Access to finance by MSE sectors
2.6. Challenges of small scale business enterprise
2.7. Reason way small business fail
2.7.1. Lack of entrepreneurial and managerial skill
2.7.2. Poor Accounting
2.7.3. Operational in efficiencies
2.7.4. The lack of a succession plan
2.7.5. Lack of access to capital
2.8. Approaches to study the challenges of SME
2.9. Opportunities of small scale enterprise
CHAPTER THREE
3. Research Method
3.1 Research Design
3.2 Method of data collection
3.3 Target population
3.4 Sampling Techniques and sample size
Reference
Acknowledgement
First, I would like to thanks the almighty God who be all thinks for me and give me this success.
Next my heartfelt appreciation and thanks goes to my Advisor Mr. KENBON who makes
valuable comments and give suggestion to the proper completion of the paper.
Abstract
The study will be conducted on challenges and opportunities of micro and small scale business
enterprise in Bule hora town. The variable to be checked as a factors are skill capital lack of
information the assistance of third party and potential opportunities for excursion and into
innovate the other one to do this the student research will be based only primary data in order to
avoid business this primary data will be obtained through questionnaires to collect available
information from sample respondent simple random technique will be used. The researcher will
be used from target population of 918 tacked 898 peoples as a sample the collected data will be
analyzed by descriptive statistics such as table.
CHAPTER ONE
1.1 Background of the study
Micro and small business enterprise is one that has relatively small share of its market and is
managed by its owners of the business .small business is the one that has fewer than 50
employees however in austral small business small business is defined as one with fewer than 15
employees .also in united states small business having less than 500 employees for
manufacturing and less than 7 million on in annual receipt for most one manufacturing (for
champs m.1997).
Micro and small enterprise allow the rural poor including some of the most marginalized and
vulnerable strata such as rural woman, youth and landless to diversify their income create new
Source new sources of economic growth and generate additional employment (including self-
employment) in rural areas. The some strata many also reached thou MSE support of small scale
local enterprise whose e business expansion can create new job for rural poor .core issues that
shape the justification for the design of investment in MSE development concerns.
The police and institutional environment country‘s legal frame work current business practices
government policies such as tax break or seed grant for MSE bureaucratic and administrative
procedures may all act either to encourage or improve development .
The availability and strength of local finance service, commercial bank, micro finance
institution, micro leasing company’s also non-financial services provider such as business
counseling must be adequate to support MSE growth.
The business opportunities and involving demand in project area .agriculture related (agro
processing input selling ,food trade ) and non-agricultural MSE opportunities (carpentry metal
working ,transport, shop, hand craft other amenities) should be present together with government
cameral indication that financial return s from typical MSE are attractive to this
cliental(Philippines, 1996).
MSE plays great role in the development of overall economy of country because of their the
following characteristics .they are more flexible in adapting change in diversification of demand
and also create employment with lower cost of investment and encourage channel and mobilize
individual saving they are also the corner stone of the entrepreneurship and ladder of high land
development.
There are many challenges that can face small scale business among this they have to complete
with much larger companies .bigger companies have big bigger budget and counsel provides
product and services at much lower cost that means because of economic s of scale they can
produce at lower cost per unit of give services for MSE this is impossible .among this financial is
the common one SME face lack of finance technology availability raw material ,finance market
government action ,existence of illegal business and a variability of restructure (brooking)
In Bule Hora town micro and small scale enterprise has problems such as lack of capital
availability, illegal business, lack of managerial responsibilities, high taxation, marketing
problems such as increases in the price of the product. Generally the researcher is to dig out the
left challenges and opportunity of this sector.
1.4 Objective of the study
1.4.1 General objective
The general objective of the study will be to analysis and explores the challenges and
opportunities of MSEs.
• To assess the effect of the body that plays role in the exposition and innovation of new
business.
• To analyze and screen out the effect of information on the growth of MSEs.
• To assess the relationship between an initial and working capital and growth of MSEs.
• To identify the effect of operational and managerial skills on the success of MSEs.
• Lack of cooperation from some respondents those who are concerned in giving
information.
• It may also serve as an initial reading for researchers and individuals seeking g intensive
study in the problem area.
• So, the significance of the study will be not limited to one party gather the whole micro
and small business will benefit from it.
• The study will help in developing an experience for the researcher such as research
techniques and reporting method. If will help the researcher to fulfill the partial
requirements for the degree of Bachelor of any (BA) in BUSINESS AMINISRATION .
CHAPTER TWO
2.1. Introduction
The primary purpose of this chapter is to get the theoretical understanding of challenges
and opportunities of micro and small scale business enterprise. This review literature is
concerned is more deeply related to the subject under the study and more specifically it focused
on six primarily area. These are definition and concept of micro and small scale enterprise, small
business success factor failures, challenges of small business enterprise, role of small business
enterprise in economy, approaches to study challenges of SMEs, sources and access to finance
by MSE sectors.
• When incomes is primarily acquired through the exercise of labor (craft, worker
• Other cases when there is mixture of both resources (shop keeper’s small farmers).
They make exceptional contribution such as, create employment opportunity, Introduce
innovation, stimulate economic completion Aid by business, promotes economic residence an
and produce goods and services efficiently (Chant, E.M.1988)
2.4. Small business success factors
Business success can be achieved in almost any location in any economic climate, and with any
amount of competition those reason are
The ability to keep developing new products to retain and build a customer base consider gradual
product development based on improvements to the current product line and sold to the current
customer base
• The maturity to treat employees, suppliers and partners, fairly and respectfully. Trust and
respect result in productivity increase in ways that may be difficult to see and quantity
• A steady source of business during both good economic times and down turns over the
long term develop a product mix that will include winners during good economic times
and other winners when times are tough
• Deal making skills to work with resources suppliers to keep costs low keeping costs
lower than competitors and continuing to look for cost reduction even when the business
is profitable is key
• The experience and skills of the top managers over half of business failures are directly
related to managerial in competence
• A product that is at least a cut above the competition and service that doesn’t feet in the
way of people buying. There must be a compelling reason to buy the product is great the
people love to provide service and the buying experience is easy and fun.(Gemini.1995)
The small business manager close acquaintance with customer and market is a good
potential strength In short both sensitive awareness of customer needs and careful
observation of market trends are necessary to make their potential strength in a reality (David
in gram)
2.4.2. Innovation
Innovation should be the ground bare for operational activities of small business
entrepreneurial and managerial skill of the owner of such farm are essential to promote the
business to growth and profitability. If the Owner (manager) has adequate knowledge of
material skill and entrepreneur skill of the owner (Manager) will lead the business to loss and
more severally to death. If its operations remain static while the external environments
changing and the completions becoming fiercer (pouiburns, and sm must dishonor 1996,
p.29)
• High potential industry is emerging or has not spent much time in the market.
• HPA offers low capital investment and enable operation with small number of employees
According to the 1995/96 survey of urban informal sector in Ethiopian lack of working
capital was among the most pressing problems that small manufacturing industrial identified
theoretically enterprise may use internal and external source of finance the former comprises
own falling and retained earning while the later includes security finance explicit borrowing
from formal and informal sources implicit borrowing in form of account payable (i.e. trade credit
and advance from clients) hire purchase and lease to buy contracts, for firms that cannot resort to
primary and secondary money and capital market (either because of the market do not exist or
firms are not in passion to access such markets) small business for example trade and bank credit
are critical sources of funding for working capital
Bank credit typically finance on going operational, seasonal or cyclical cash flows shortages
startup costs for new operations Trade credit on the other hand is given for purchase of raw
material and their inputs (……….., 2003)
Government credit programs to MSE in many countries Used to be based the poverty lending
approach which concentrate on reducing poverty through credit, often provided together with
complementary services, such as skill as training and teaching of literacy and numeracy, health,
nutrition, family planning and the like, Under this approach donor and government funded credit
is provided to poor borrowers, typically at below market interest rate the goal is to reach the
poor, especially the poorest of the poor. Except for mandatory saving the mobilization of local
saving is normally significant part of this approach to micro finance however subsidized credit
programs have done very little to improve access of MSE’s operators to financial services
instead they hindered the development of sustainable financial institutions Credit subsidized also
credited distortion in financial markets of it was in response to this challenges state the micro
finance revolution in 1985 come of age in the 1990 which is transition from the poverty to
lending approach to financial lending approach. (Robinson, 2001)
Another problems that is common for many small scale business is hard to attract employees. It
is difficult for small scale business to compete with the salaries and benefit that large
corporations provide. Many potential employees are also hesitating to work for small scale
business, because they feel that there is not opportunity for advancement.
Because of this most small scale business is running by the owner of the business. This has its
own adverse impact on the growth of the business. As have seen above since it is difficult for
small scale business to get skilled man power, they choose to manage the business by themselves
without any knowledge and experience about it. And also founder dependence is another without
its founder is a business with dead line. Many businesses suffer from the founder dependency
and this dependency is often caused by the founder being unable to let go for certain decisions
and responsibilities as the business growth. A business owner merely has to give over more
control to their employees or partners. In pacts, however this is a big stumbling block for
founders, because it is usually involve compromising on the quality of work being done, until the
person doing the work learns the rope.
The problem of balancing quality and growth is another problem that comes from the managing
of the business by the owner without managerial skill. Even when a business is not founder
dependent, there is a time when issue from growth seems to mate or even out away the benefit.
Whether a product or the service at some point a business must sacrifice in order to scale this
may mean not being able to personally manage every client relationship, not inspecting every
widget unfortunately. It is usually that levels of personal engagement and that attention to detail
that makes a business some successful therefore many small business owner often find
themselves tied to this habits to determinant of the company’s growth.
The is large middle ground between shoddy work and un health obsession with quality so it is up
to the business owner to navigate the companies process to war ds a compromise that allows
scale without hurting the brand.
The opportunity is identified by using input from consumes, business associates, channels
members of technical people, each opportunity must be carefully screened and evaluated. This
evaluation of the opportunity is perhaps the most critical enchantment of the small business
process, as it allows the entrepreneur to assess whether the specific product or service has the
return needed for the resource s requires.
CHAPTER THREE
3. Research Method
Secondary source: will be used from documents, related books, internet and other organizations
records.
APPENDEX
BULE HORA UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF BUSINESS ADMINISTRATION AND
INFORMATION SYSTEM
This questionnaire is presented to you as a past of study under taken to identify emerging canings
and opportunities that small and micro enterprises are facing in their day to day operation.
Dear respondents please fill in the below listed questions with the help of data collectors as
genuinely as possible your cooperation in this regard is in valuable and complete response will
be highly appreciated.
Thanks you in advance
Direction indicates your response by putting tick (-) mark against the appropriate box and write
brief answers in the given space and don’t write your name.
Part I Demographic questions
Age: 18- 30 31-50 51-601 < 65
Sex: male Female
Education status 0-4 5-8 8-10 10+1 – 10+2
College diploma and above
Marital status: Married Unmarried
Types of small scale industries that you run
Service Merchandise Manufacturing
Other specify ___________________________________________
The managers of the industries:
The owner Employed Relative of the Owner
Other specify _________________________________________________________
At the time you started the business did you face the establishment problem? Yes No
If your answer for questions No 7 is yes what are those problems?
_______________________________________________________________________
Have you made any cost benefit analysis before starting the business?
Yes No
If your answer for question No 9 is No why not?
Lack of ability and skill Lack of information about its importance
If any other specify ____________________________________________________
Did you get some profit from your business yes No
If your answer to question No 11 is yes for what purpose did you use it?
Totally for consumption for reinvestment
For deposit
If any other please state _____________________________________________
If your response for No 11 is No you want to change your business operations? Yes v No
If your response No question 13 why not? _____________________________
_______________________________________________________________________
How many capitals do you have?
1000-5000 5001-10,000 10,001-20,000 20001<
Is initial capital is enough turn your business? Yes No
If your answer for Q. No 16 is not what are your sources of additional capital? Bank
Informal lender Credit from friends
Credit from family
If any other please specify _____________________________________________
What is your reason to use the above source? _________________________
_______________________________________________________________________
How do you rate presence and extent of problem related managerial training and consultancy
services.
Non problem at all serious problem
Same problem but manageable
Is there anybody that supports you to expand your business, of to involve a new business? Yes v
No