First of all, I want to thank the almighty God for giving me such wisdom and strength to complete this research work and the course. Then I want to thank my parents and family who supported me through the entire research program. Then I want to appreciate my supervisor who helped me and guided me with different information and techniques. Last, of all, I want to thank all the participants and my colleagues who gave their valuable time in my research work.
The proposed study aims to find out the challenges as well as barriers of SMEs in developing countries for business expansion into the global market in the perspective of Bangladesh. The objectives of this study are a) To analyze the roles of theories and models in the internationalization process of SMEs; b) To assess the models and theories that are most useful to the SMEs internationalization process; c) To identify the challenges of SMEs internationalization in developing countries; d) To identify the challenges of the SMEs in Bangladesh facing to enter a foreign market; and e) To recommend SMEs in developing countries on how the challenges can be overcome in the internationalization process.
The SMEs of developing countries play a very significant role in case of increasing their national income. SMEs offer job opportunities to the people of developing countries. However, when they try to operate their business in the international level, there are many difficulties that hinder their business. To identify these obstacles, the researcher first conducted a literature review. In the literature review the concept of SME, the part of SMEs at the international level, the internalization process of SMEs, the theories and the models, the conceptual framework of the literature review, the gaps of the literature review have been explained. To collect the primary data the researcher conducted the survey.
To carry out the research the researcher applied the combination of Positivism and interpretivism philosophy, a fusion of descriptive and explanatory research designs, deductive approach. To gather primary data the researcher carried a survey on 100 marketers and owners of SMEs in Bangladesh. They were given a questionnaire that included 13 questions. The survey disclosed that most of the participants of the survey agree that, globalization, limited access to the operation, no access to the international market, lack of international market standards and regulations, deficiency in the government’s help, not be able to fulfill the customers need, scarcity of the marketing skills and weak link in the market are the main challenges that SMEs face while operating their business in the international market.
Chapter 1: introduction
SMEs are the backbone of the financial growth of the nation. They have a vital role in the development of developing nations like Bangladesh. These countries are powerful with their workforce, resource-saving and have the ability to create job opportunities for many people (Lalkaka, 2010). They are the crucial elements for development, decreasing the problem of unemployment and reducing the poverty of the country.
1.1 Background of the study
The international extension of SME business provides profit in the sale and marketing and vacancy for the job. According to Gatington and Anderson (2011) selecting a proper method through which the SME will enter the international market is vital. The reason behind this if the chosen method is proved to be not right for the SME, and then it can impact the survivability and financial state. Lu and Beamish (2011) suggested that, as a mode of entry into the international market, exporting can be one of the modes of entry. Wheeler et al. (2012) suggested that both direct and indirect exporting is well known and has dominancy in the market. This is because their risk level is less and they more cost-friendly commitment.
There are many types of SME business. village handicraft makers (weaving, embroidery etc) potteries, dying, small machine shops, restaurants, plastics, knitting, small dairy process, toys, leather goods, live stocks, fisheries, chemical, transport, constructions are common in Bangladesh (Khan, 2010). The country is very powerful with its workforce. Therefore, their SMEs have gained some speed in their state. Hong Kong, Japan and Korea are the countries from which the Entrepreneurs have taken the benefit from Bangladesh. Bangladesh’s labor is cost-friendly and easily trainable. Hong Kong, Japan and Korea use this labor of Bangladesh and take help from the infrastructure of the country and do their export business (Minton, 2016).
SMEs are becoming the backbone of the financial growth of the nation. They have a vital role in the development of developing nations like Bangladesh. These countries are powerful with their workforce, resource-saving and have the ability to create job opportunities for many people. The amount of contribution the SMEs can make for the nation by increasing employment and income, it known worldwide, especially in Bangladesh. Bangladesh has about six million SMEs –firms and now it is an accepted fact they have a very important role in the countries development (Quddus and Rashid, 2010).
SMEs in Bangladesh is defined for purposes of industrial policies by the Ministry of Industries (MOI). According to history, this defined term has a fixed investment. SMEs with fixed investments of 100,000 Taka (1,750 USD) but less than 100million Taka (USD 1.75 million) are distinguished from a medium-sized business that has fixed investments of 100 to 300 million Taka (USD 1.75million – 5.25 million). The currency of Bangladesh is called Taka. Small enterprises involve less than 50 employees and as fixed investment less than 15 million Taka. Whereas Medium enterprises have less than 51-99 workers and have fixed investments of the capital of 1.5 million and 100 million Taka (Chowdhury, 2017).
1.2 Rationale for the chosen topic
Several developing countries like Bangladesh hugely depend on SMEs for their financial growth and development. Stein et al. (2010), suggest that, in South Asia, Bangladesh has the largest number of SMEs besides India and Pakistan. According to Ahmed et al (2011), about 82% of Bangladeshi workers work in SME companies beside ready-made garment factories. The ready-made garments products are the top SMEs in Bangladesh. Chowdhury and Amin (2011) suggest that SMEs of Bangladesh are responsible for manufacturing value-added in about 45%, for industrial employment in about 80%, for total industrial units in about 90% and for total labor force in about 25%. In the earning from the export business, their total offering extends from 75% to 80% following the current economic census.
Daily Star (2012) reported that about 75% of the economy is made by SMEs in Bangladesh. Chowdhury (2017) recommend that, outside the agriculture business, virtually almost every business sector including the micro and tiny enterprises can be count as SME and medium enterprise in Bangladesh. Large companies are responsible for only 0.15% of the business sector. Therefore, SME is a powerful element for the economical development of the poor country like Bangladesh. The SMEs of Bangladesh have already the minds of the researchers, government and academic organizations for research and study. They see SMEs as an important tool for reducing the poverty and contributing in all over the economy. Therefore, they want to know more about it and make it work more. As Begum (2013) suggested that, about 15% contribution in the Gross Domestic Product (GDP) of Bangladesh is made by the Bangladesh SMEs.
However, the understanding and the knowledge depth of the SMEs marketers of Bangladesh is not sufficient about the international market. The reason behind this is, as there is a deficiency in the research studies about this sector, the marketers do not have a source to know properly about the foreign market. Moreover, although the government and NGOs have been trying to actively promote SMEs but they are not very successful to reveal the benefit of SMEs in the development and growth of the whole country. Therefore, the challenges the SMEs face during their growth in Bangladesh need to be identified. It is against this background that this study was undertaken. For this, now it has become an issue for the SMEs of the developing countries to identify the challenges they face during entering the international market. Arteaga and Fernandez (2010) stated that the methodology application can be weak by the researcher. Therefore the outcome of the past studies may be inconsistent.
1.3 Purpose for undertaking the study
Although the internationalization of SMEs is very important for developing countries, the challenges and obstacles the SMEs face during entering the international market are known very little (Laufs and Schwens, 2014). Hulbert et al. (2013) suggested that SMEs of many countries are failing to flourish. In developing country the rate of failure of SMEs is more. Therefore, the purpose of this study is to find out the gaps in the literature reviews and difficulties encountered by the SMEs of developing countries like Bangladesh.
1.4 Research problems
SMEs and medium-sized businesses encounter many difficulties while entering and operating their business at the international level. Arslan et al. (2015) disclosed that entering SMEs in the international market has been a topic of debate for many years. Though the potentiality of the SMEs of developing countries like Bangladesh is very high, yet they face many complexities while they want to run their business internationally (Milanzi, 2012). Many factors are responsible for these challenges. They are not enough capital, irregular power supply, deficiency of infrastructural (water, roads etc.), deficiency of concentration, insufficient market research, lack of succession plan, inexperience, deficiency of proper record, not being able to divide business and family or personal finances, business strategy deficiency, not able to differentiate between revenue and profit, inability to procure the right plant and machinery, cut-throat competition, inability to engage or employ the right caliber of staff, (Elaian, 2016). Minton (2016) suggested that the external problems of SMEs are lack of resources, tariffs and regulations, etc. The internal problems are shortage of capital, lack of infrastructure, poor management skills, poor strategy making, lacking of education etc. all the previous studies were based on the problem faced by the SMEs while growing their business in the developed country. There are no sufficient researches on the issues which faced by the SMEs of developing country while going international. Therefore, the purpose of this research is to increase the understanding in the topic which describe the issues which faced by the SMEs of developing country while going international…………..