iBAN

The Inclusive Business Action Network (iBAN) is a global initiative
supporting the scaling and replication of inclusive business models.
Through its strategic pillars iBAN blue and iBAN weave, iBAN manages
an innovative online knowledge platform on inclusive business
and offers a focused Capacity Development Programme for selected
companies and policymakers in developing and emerging countries.
iBAN creates a space where evidence-based knowledge transforms into
learning and new partnerships. With its focus on promoting the upscale
of inclusive business models and consequently improving the lives of
the poor, iBAN is actively contributing to the achievement of the United
Nations Sustainable Development Goals. iBAN is funded by the Federal
Ministry for Economic Cooperation and Development and the European
Union. It is implemented by the Deutsche Gesellschaft für Internationale
Zusammenarbeit (GIZ) GmbH.

Business development needs of SMEs in developing economies

Capacity Building
Partnerships

INTRODUCTION

Small and medium-sized enterprises (SMEs) are non-subsidiary, independent firms which employ few numbers of employees. This number varies across countries. The most frequent upper limit designating an SME is 250 employees, as in the European Union. However, some countries set the limit at 200 employees, while the United States considers SMEs to include firms with fewer than 500 employees. 

Some countries categorise their enterprise according to the financial state of the economy or the amount of money involved in such enterprise. For example, in Nigeria, SMEs, as defined by the National Council of industries refer to business enterprises whose total cost excluding land is not more than two million naira (N2, 000,000) only.

Business development comprises a number of tasks and processes generally aiming at developing and implementing growth opportunities within and between organizations.  Business development is the creation of long-term value for an organization from customers, markets, and relationships.

Business development is to be thought of as a marketing tactic. The objectives include branding, expansion in markets, new user acquisition, and awareness. However, the main function of Business Development is to utilise partners in selling to the right customers. Creating opportunities for value to be ongoing in the long-term is very important. To be successful in Business Development the partnership must be built on strong relationships

 There is no doubt that small and medium scale enterprises are the saving grace of economies particularly the developing economies. SMEs are part of the responses to development in most developing countries and have proven to play major roles of development in developed worlds.

Listed below are some major impacts of SMEs:

  1. SMEs have been found to be part of the major providers of employment in developing economies e.g. Data from the federal office of statistics in Nigeria reveals that about 97percent of the entire enterprises in the country are SMEs and they employed an average of 50% of the working population as well as contributing to50 percent of the country industrial output.
  2. SMEs are also said to be responsible for driving local innovation and competition in many economic sectors.
  3. SMEs have promoted indigenous entrepreneurship and have also served as a substitute for importation, thereby, encouraging exportation.

Making sure that these SMEs survive is therefore, important for the economic survival of developing countries in particular.

 BUSINESS DEVELOPMENT NEEDS OF SMEs

Despite much attention on SMEs in developing countries especially, SMEs still face some major challenges that hinder their growth and prevents them from competing favourably with large scale companies. It is, therefore important to identify these needs and fulfil them in order to foster their growth and subsequently aid economic growth.

Finance: This is the major need of most SMEs.  Although a lot of strategies have been put in place by both Government and non-government organizations to reduce this problem to a minimal level, this problem still seems not to be solved. This can be attributed partly to the stringent measures involved in having access to these loans and grants. While SME operators have been claiming that monetary agencies are requesting stringent conditions and terms of approval, the monetary agencies,  on the other hand, had claimed that SMEs operators don’t present viable projects.  Furthermore, values of tax should be reduced or scrapped for SMEs for at least few years of existence to enable their stability in the market.

 Infrastructure: SMEs need adequate infrastructural facilities such as power, water, transportation etc. to reduce the cost of production and services and increase overall profit margin to maintain the business and compete favourably with existing foreign ones.

When the cost of production is high, standard falls and the quality of goods and services produced are not comparable with their foreign counterparts and lesser demand for these products or services.

Research and development facilities. This is unarguably necessary for product development and research into other unexplored areas of the SMEs enterprise. This will also aid in capacity development and quality control measures to ascertain that products and services delivered are of acceptable standards by local and international consumers.

Leadership and Management skills: A major part of entrepreneurship is a sound knowledge of leadership and management Proper technical know-how in the aspect of management. Proper management and entrepreneurial skills, adequate recording and accounting skills are important for the growth of SMEs.

Creativity: SMEs need to dwell on new innovative ideas or rebrand existing ones.  BDSs are provided to help owners of enterprises obtain new ideas on how to improve their businesses through, for example, increasing productivity, reducing production costs or accessing a more profitable market

Business and competitor analyses:  SMEs need to understand the driving force of the market, who their consumers are and who their competitors are. The major focus of SMEs should be what can be an edge over major competitors in the market

Effective communication skills and strategies: As the saying, the first impression lasts longer; it takes only a few minutes to either gain or lose the attention and interest of a potential client. Effective communication skills are important in generating and sustaining the interest and trust of a consumer. Employers and Employees involved in SMEs should undergo training in effective communication to gain insights on how best to engage potential and existing clients.

Collaboration and partnership: Building of partnerships with companies that have complementary products and services will help in creating awareness and also boost sales of SMEs.

CONCLUSION

SMEs are crucial to the growth and development of developing countries. More efforts and strategies should, therefore, be put in place to ensure that these businesses thrive successfully to increase the level of employment, improve the quality of life of people, eradicate poverty and also encourage production for local and foreign use.

Business development determines the future course and performance of any company - and is especially important in today's rapidly changing and increasingly global business environment. Business leaders, therefore need strong skills for identifying new business development opportunities, assessing potential risks, defining a business strategy, bringing the strategy to life, and adjusting the course according to changing business condition.

By Aishat Modupe Akande, Media and Communications Executive, AfriLabs.

 

AfriLabs is a pan-African network of 40 technology innovation hubs in 20 African countries. AfriLabs was founded in 2011 to build a community around the rapidly emerging tech hubs in Africa. Each hub serves as a nexus for entrepreneurs, technologists, investors, tech companies and web/mobile engineers in its community who are set to build the innovation economy across Africa.

This blog is part of the September 2016 series on Inclusive Business Development Services, in partnership with the Inclusive Business Accelerator. Don’t miss the whole series on support available to inclusive business from practitioners, donors and intermediaries including Afrilabs, DFID, Endeva, EY and many more…  

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