Abstract of the Student #Thesis: TILAHUN TEFERA WORKU
Globalization is a major driver affecting nearly every business across the globe. With increased competitive pressure and rapid technological change, globalization has brought continuous changes to the business world. Consequently, small business enterprises (SBEs) in Africa, and particularly in Ethiopia, face more challenges than opportunities as they attempt to enter global markets and become competitive.
Small business enterprises play an essential role in the economic development of all countries, especially in developing nations. Similarly, micro and small business enterprises (MSMEs) significantly contribute to the Ethiopian economy. The MSME sector, dominated by small businesses (72.8%), is a key strategy for employment, income generation, and poverty reduction by the Ethiopian government.
The effects of globalization on small and medium enterprises (SMEs) have garnered significant attention from academics and practitioners both domestically and internationally due to these contributions. However, SBEs, particularly in developing countries, face increasing competitive pressure fueled by globalization. This pressure has led some SBEs to close down or struggle to succeed, and in some cases, simply to survive. The micro and small business sector in Ethiopia is characterized by a high failure rate and low levels of employment, often managed and operated by owners or families.
The objective of this thesis is to explore the effects of globalization on SBEs in Ethiopia, with a particular focus on Addis Ababa, the capital city. Based on the study's findings, the research aims to determine the extent to which globalization benefits and challenges the survival, sustainability, growth, and competitiveness of small business firms in the country.
An in-depth literature and theoretical framework review on globalization and its effects on SBEs, both globally and specifically in Ethiopia, was conducted. The study employed a mixed research approach, utilizing qualitative research methodologies to collect data. Primary data sources included questionnaires, in-depth interviews, and focus group discussions. A sample population of 25 small firms was selected using purposive sampling. Questionnaires were distributed to 15 owners/managers, in-depth face-to-face interviews were conducted with 10 respondents, and focus group discussions were held with a selected group of 5 SBEs. The collected data were presented in tables with frequencies and simple percentages and analyzed accordingly.
The findings of the study indicate that globalization affects the development, survival, and growth of SBEs in Ethiopia, as it does elsewhere. Ethiopian SBEs are influenced by both internal and external factors, with positive and negative effects. The business structure, capabilities, and culture of small firms significantly contribute to these differentiated effects. The study also revealed that SBEs face challenges from increased competition and technological changes but have opportunities to participate in the open market and learn from global large firms. However, the SBEs lack knowledge, experience, financial and technical resources, and support from technology, policy, and institutional and legal frameworks to fully leverage these opportunities and cope with the challenges of globalization.
The globalization performance of developing countries can be measured by their integration into the global economy, ability to supply quality products and services to the international market, flow of foreign capital/finance, trade, appropriate technology, foreign direct investment, and market integration.
To address the challenges posed by globalization, the government must develop new policies, institutional and legal frameworks that broaden financial access, remove barriers, and simplify preconditions, requirements, and procedures. Similarly, SBE owners/managers should focus on technological improvements, R&D, human capital development, identifying niche markets, export orientation, and implementing new coping strategies to benefit from globalization's opportunities and ensure their survival and growth.
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