MICRO OR SMALL BUSINESS

PRONS AND CONS FOR ESTABLISHING MICRO OR SMALL BUSINESS

Definition of Micro or Small Business
Micro enterprise is a general term encompassing Micro, Small, and Medium Enterprises (MSMEs). The Micro enterprises, as the word micro means, they are very small businesses, micro enterprises covers on farm activities such as agriculture and livestock keeping at subsistence levels, small and medium enterprises (SMEs) covers non farm activities mainly manufacturing, mining, commerce and services. In the context of Tanzania, micro enterprises are those engaging up to 4 people, in most cases family members, or employing a capital amounting up to T.sh. 5 Million. The majority of micro enterprises fall under the informal sector. Small enterprises are mostly formalized undertakings engaging between 5 and 49 employees or with capital investment from T.sh. 5.0 Million to T.sh.200 Million. Medium enterprises employ between 50 and 99 people or use capital investment from T.sh. 200 Million to T.sh. 800 Million. In short, Micro, Small and Medium Enterprises are abbreviated as SMEs. How ever, in Tanzania, a capital investment of above T.sh. 800 Million and more than 100 employees the enterprise is categorized as large enterprise.


ADVANTAGES (PRONS) FOR ESTABLISHING MICRO OR SMALL BUSINESSES (SMES);-
Generally, the advantages of establishing Micro or Small scale businesses are often not static. Rather they are best seen in terms of endless transitions that confront the poor. For example, SMEs are particularly important in rural to urban transitions where they can provide flexible diversions of income. SMEs are important in transitions from state controlled to market driven economies like what Tanzania is experiencing to day, Tanzania is gradually changing its economic policy from a centrally planned economy of the Ujamaa economic policy to a free market economy where flexibility to learn and change are critical characteristics of SMEs in the market economy. SMEs are also important in the transition from family labor to sharecropping to wage labor in rural settings.

In the case of Tanzania, it is estimated that about a third of the GDP originates from the SME sector. According to the informal sector survey of 1991, micro enterprises operating in the informal sector alone consisted of more than 1.7 million businesses engaging about 3 million persons that was, about 20% of the Tanzanian labor force. From this information, it is seen that SME sector plays an important role in the economy of Tanzania.

The advantages (prons) of SMEs can be categorized in to the following categories;-
Basic survival, Livelihood security, Affiliation and relationships, Creative devours, Aesthetic awareness and cultural identity.

Basic Survival;-
Economically, SMEs provide local outlets for inputs and outputs without externally imposed standards. Normally, the production of goods and services is done at local levels, the inputs are obtained at local level and the output is consumed at local level as well, therefore there is no externally imposed standards which could otherwise hinder the economic development of the people due to externally imposed high standards of goods and services which could otherwise not be achieved by the majority.

But socially SMEs strengthen connectedness to and responsibility for sustainability of production. This is mainly because most SMEs are owned and operated in families, as a result of this the family members are connected together in caring out the business responsibilities in a sustainable way.

In the environmental aspect, the negative environmental problems caused by the SMEs are local and therefore are more quickly located and dealt with. For example, it is easy to control people from charcoal burning in villages because the charcoal producers can easily be located and the forest which has been destroyed can also be located, also the areas which have been destroyed can be rehabilitated just in a short time and with little rehabilitation capital, either by planting new trees or by leaving the young trees to grow without cutting them, this can be done by imposing regulations on the responsible areas.

Livelihood Security;-
Economically, SMEs reduce outside dependence of the people with greater local resilience in uncertain times. For example, there are times where small farmers fail to get good harvests due to poor rainfalls, but these people can survive through relying on other small businesses which they can perform until the next harvest, this is very common in Tanzania.

Socially, in livelihood security, SMEs provide flexibility, flexible working hours is very important to family caring. For example, mothers can attend their children at home any time when deems necessary and attending funeral ceremonies as a way of building a strong cohesion among community members.

Environmentally, SMEs are multi-functional, especially at micro level, SMEs builds environmental resilience.

Affiliation and Relationships;-
Economically, profits accrued locally from SMEs are often reinvested locally with local economic multipliers. For example, a vegetable producer reinvests his/her profit by buying animals to keep in house, therefore the profits he/she gets from the sales of vegetables is reinvested to animal keeping.

Socially, there is a greater social equality that humanizes relationships in buying and selling building - community. During the interaction of selling and buying, the people get socialized and build relationships which are socially strong and very important in the general wellbeing of the community. For example, a built good social relation can be an important tool during hard times like deaths and fire hazards.

On the environmental point of view, the short transport distances used by the SMEs operators significantly reduces pollution and human risk. For example, when a farmer uses his ox-cut or a bicycle in carrying his farm produce to the market, there is very little risk and no pollution to the environment can be made.

Creative Endeavour;-
Economically, SMEs distribute economic opportunities and returns fairly across multiple owners. Generally, SMEs are the only job opportunities which can employ the larger population segment in Tanzania because SMEs are labor intensive, therefore any one has an opportunity to start and run his/her small business and get returns through it.

The use of local knowledge and skills with ownership over business outcomes highly increases the opportunities for the sustainability these SMEs, the available local knowledge and skills also helps to improve the quality of goods and services produced at local level, making these goods and services more acceptable at local level.

There are also increased options to use and consequent vested interest in conserving the local resources. So long as these SMEs operators highly depend on local resources for raw materials or in the process of production of their goods and services, therefore these people are very much concerned with protecting the environment for a sustainable exploitation of these resources. For example, the adopted way of conserving soil in Shinyanga, the method called Ngitile, is commonly used by small farmers in conserving the soil on their farms for a sustainable good harvest.

Aesthetic Awareness;-
Economically, SMEs exploit local niches and maintain diversity in available products. The diversity in local resources in an area makes it possible for the SMEs operators to produce different products which will fairly meet the different interests of their customers.

In a social point of view, understanding of the local tastes of the market fosters craftsmanship. Therefore, a SMEs operator produces products of specific need in the community to meet their local tastes.

Cultural Identity;-
SMEs have a provision of culturally sensitive options, options to empower the marginalized groups. In most cases the hand caped, the widows and families headed by women are much more empowered by operating these SMEs.

As advantages, SMEs operators (also called entrepreneurs) have some opportunities in their business operations, these opportunities are;-

Opportunity to Create Own Destiny;-
Owing a business provides SMEs operators the independence and the opportunity to achieve what’s important to them. Entrepreneurs want to call the shorts in their lives and they use their business to make that desire a reality.

Opportunity to make a Difference;-
Increasingly, entrepreneurs are starting business because they see an opportunity to make a difference in a course that is important to them.

Opportunity to Reach Full Potential;-
Most of the people find their work boring, unchallenging and unexciting, but not entrepreneurs. To them there is little difference between work and play, the two are synonymous. Entrepreneurs business becomes their instruments for self expression and self actualization.

Opportunity to Reap Impressive Profits;-
Although money is not the primary force driving most entrepreneurs, the profits their business can earn are an important motivating factors in their decision to launch firms. Most entrepreneurs never become super rich, but many of them do become quite worthy.
Opportunity to Contribute to the Community and be Recognized for the Efforts;-
Often small business owners are among the most respected and trusted members of their communities. Business deals based on trust and mutual respect are the hallmark of many established small firms.

Opportunity to do what Entrepreneurs enjoy and Have Fun at it;-
A common sentiment among small business owners is that their work really isn’t work. Most successful entrepreneurs choose to enter in to their particular business fields because they have interest in them and enjoy those lines of work. They have made their avocations (hobbies) their vocations (work) and are glad at what they do.

DISADVANTAGES (CONS) FOR ESTABLISHING MICRO OR SMALL BUSINESSES (SMES);-
While there are many potential advantages of SMEs, there are also some significant disadvantages in certain contexts. These disadvantages are as follows;-
1. Most SMEs tend to suffer from high input, transaction and investment costs. This is partly due to poor bargaining power and lack of collateral for getting big loans. Therefore SMEs have a very limited access to capital markets, due to owner preferences and are not able to meet the minimum requirements of capital markets.
2. Nepotism; this indicates that the overall stable relationship SMEs develop with their partners can turn in to a weakness when they favor only relatives and friends. This can make it very difficult for outsiders to come in to the business, also makes it more difficult to attract outside expertise and professional management.
3. The relatively small size of SMEs often leads to disadvantages of economies of scale. This means that most SMEs can not make use of cost advantages in mass production. Further more some costs are not variable costs, they are fixed costs but the production is still at very low rate making the enterprises be run under diseconomies of scale. For example, the food processors commonly called mama lishe or baba lishe, most of these people do not operate under economies of scale, you may find them having no prepared food for the customers just at 2.00 pm, but they have very high fixed costs assets which are not utilized at maximum.
4. A special problem for owner-managed enterprises is to get outside management expertise in to the business. Even if the owner is very willing to share tasks with outsiders, such functions are often not attractive due to the dominance of the owner, as a result many SMEs sorely rely on the on the owners knowledge and vision which in most cases is limited to his knowledge and experience.
5. The use of local resources and markets of SMEs limits their scope of expansion to big markets outside their local areas, this make SMEs keep on been small or with a very limited growth over a very long time.




CONCLUSION
Though there are some disadvantages and limitations of SMEs as seen above, but still SMEs are very important tools in the economic growth of Tanzania and any developing country, the most important thing is only the government of Tanzania should create a good and enabling environment for these SMEs to flourish through instituting relevant polices encouraging the development of the sector.