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“Competitiveness, Challenges and Prospects of SMEs in Bangladesh for

Course no: BA-412

Course name:Business Research Methodology

Submitted to:
Eijaz Ahmed Khan
Assistant Professor
Business Administration Discipline.

Submitted by:
Pioneer II
Group Members
Mahmudul Hasan Siddiqui
ID # 040308
Tasmin Islam
ID # 040316
Zahir Abdullah
ID # 040320
Salma Begam
ID # 040328
Mohammad Ali
ID # 040342
4th Year, 2nd Term

Business Administration Discipline

Khulna University, Khulna.

Date of Submission: 13 July, 2008

“Competitiveness, Challenges and Prospects of SMEs in Bangladesh for

1. Introduction:
The Least Developed Countries (LDCs) in the east have started refocusing their attention
on SMEs to enhance their role in bringing about structural changes in their economies.
For Bangladesh SMEs have assumed special significance for poverty reduction programs
and potential contribution to the overall industrial and economic growth through SMEs
internationalization process. This research uses some studies to identify some
competitiveness, challenges and prospects of SMEs in Bangladesh for Internationalization
as well as some constraints that have been hampering SME growth and to provide some
pointers for the future.
In Bangladesh this SME sector is contributing more than 25% of the total GDP. So the
economic escalation and poverty alleviation of this country becomes the opposite side of
a coin with SMEs development. With this potentiality if we consider the trade
liberalization or internationalization then this sector becomes very lucrative for generating
much more profit to the successful Entrepreneurs. With this great opportunity for
internationalization the situation will be very competitive and challenging for the owners
of SMEs to survive in the market in the battle of price war, product offering, and product
quality and so on.

2. Literature Review:
In this research, an attempt will be made to examine the current situation of the SMEs in
Bangladesh. Still the pace of SME in the international competition is minimal. From the
late 1980s and mid-1990s, when the giant industries became increasingly dominant, small
and medium size enterprises remained unchanged and even increased slightly in absolute
terms. There seems to be an inconsistency between the increased heavy industries and the
unsatisfactory growth of SMEs.
The economy of Bangladesh is at the crossroads. Rapid liberalization has put most
existing industries specially SMEs under severe strain because of their inability to
compete with consumer goods being freely imported after the withdrawal of quantitative
restrictions and the drastic reduction of import tariffs. There are no estimates yet about
likely losses to the domestic trade and economy of the country from the flood of
imported consumer and industrial products - cosmetics and toiletries, food and beverages,
textiles and apparels, footwear and leather goods, chemicals and pharmaceuticals, light
engineering products, machine tools, hand tools and so on. All these products (all under
the SME category, and the rate at which the glittering multistoried shopping malls are
springing up in Dhaka and other major cities of the country is perhaps a good indicator of
the rate of displacement of domestic products by imported merchandise. Although some
producers have been successful in improving their products and significantly increasing
external market access, most are languishing.
For internationalization the adverse effects that present SMEs are facing cannot be
stopped rather it needs to compete with the foreign products in domestic as well as
international market. To be competitive, some ways need to find out strategically for
SMEs to be competitive for internationalization.

SME participation in global value chains has to be placed in the broader context of SME
internationalization. The reorganization of production at the international level and the
development of global value chains are having significant effects on SMEs, in particular

by expanding their business opportunities. This is important when considering that
reaching international markets is a problematic step for SMEs.

Declining costs of information and communication technology, globalization and

changing conditions for innovation and entrepreneurship are bringing new opportunities
as well as challenges for countries and business alike around the world. In this rapidly
evolving playing field, the role of large and small firms is changing. Large firms are
downsizing, outsourcing and off-shoring while raising productivity around a narrowing
core business. Small and medium sized enterprises (SMEs), on the other hand, account
for a growing share of the work force in most countries. In parallel, SMEs are becoming
more important for economic growth, exports, local development and innovation.

The international joint venture (IJV) is an important mode in the internationalization of

small and medium-sized enterprises (SMEs). Internationalization in turn is an
entrepreneurial behavior in the pursuit of growth. Partnering strategies in the formation of
IJVs can have significant effects on the outcome of SMEs’ international expansion.
SMEs’ IJVs with local partner(s) may be associated with decreases in longevity,
especially when SMEs acquire host country knowledge.

In Bangladesh, a sustained level of development of small and medium enterprises (SMEs)

is highly needed to reach the targets set by the United Nations (UN) in the Millennium
Development Goals (MDGs) to alleviate poverty. This urgency is reflected in the
government’s pro-poor policies, especially in the poverty reduction strategy paper
(PRSP). Considering the country’s level of economic growth, composition of resources,
level of global integration, urbanization etc., there is ample scope for development of
diversified and non-traditional SMEs in the country. However, low productivity, lack of
access to information, high import of finished products etc. put the SMEs in a challenging
situation. In this context, the role of the government both in terms of policy and
operations is strongly felt.
In general, SMEs of Bangladesh are currently undergoing structural transformation
because of various linkages at domestic and international levels. This structural
transformation contributes to making changes in product composition, degree of
capitalization, and market perpetration through the adjustment of changes in technology,
market demand and market access. However, growth of SMEs has been largely retarded
by a number of constraints, of which financial constraint is mentioned at first. Besides,
there are constraints in the cases of legal, administrative, regulatory, technological,
infrastructural, and human resources. Government’s pro-poor policies should focus
sufficiently on these constraints and various budgetary measures should emphasize on the
improvement of these constraints.

3. The Conceptual Model

This part of the study will chart out the conceptual and measurement issues of SMEs
internationalization. SMEs internationalization through Competition and Challenges can
be interpreted according to following model (See Figure:1). Which describes the
process of SMEs internationalization is considered to be an essential
part in the competitive advantages especially in competition and
challenge. It is believed that the SME Cluster model increases the

competitiveness of the SMEs of Bangladesh and thereby eliminates the
potential problems in the process of SMEs internationalization.
SME create local business
From peer-to-peer support Viable business cluster
cluster & production
groups & business meet local market demand
networks by SMEs

Business forms
SME could partnership with
influence corporations’ supply
WTO chain and
negations Advocacy international funding
and trade networks system that open
policies channels to
impact on international markets
local small SME’s network build
business for international
Figure1: SME Cluster Strategy Model
There may be many methods to measure the extent to which the SMEs of Bangladesh are
becoming internationalized. In this research some methods will be chosen for addressing
the competitiveness and challenges through SME internationalization.

4. Research Methods
The descriptive research study will provide some guidelines and recommendation that are
important for the internationalization of Bangladeshi SMEs. In addition, an attempt will
be made to examine the performance of the SMEs whether they are getting success or not
for poverty alleviation of Bangladesh.

4.1 Information to be obtained

To serve the research study lot of information will be needed relating with
competitiveness, challenges and prospects factors, such as price war, product offering,
and product quality and so on. It is assumed that for internationalization of the
Bangladeshi SMEs those factors might have been important.

4.2 Sources of information and data collection

Most of the information will be collected from field survey. Personal interviews method
may be perfect for collecting information. At the time of collecting information several
criteria needs to be keep in mind to fulfill the research objective such as flexibility of data
collection, diversity of information, control of respondents, control of field force and data
collection environment, higher response rate and quantity of data.

4.3 Questionnaire design, measurement and scaling procedures

Questionnaire design will be formulated as a series of steps. At first needed information
will be specify once again. The socio economic characteristics of the respondents are not
much diversified so that only one type questionnaire may be appropriate for the research
study. In personal interviews, respondents see the questionnaire and interact face to face
with the interviewer. Thus, lengthy, complex, and varied questions can be asked. Besides,
sometimes the respondents may be unable to articulate certain types of responses. So
respondents will be given aids, description to help them articulate their responses.

Seven point Likert scale-ranging forms ‘strongly disagree’ to ‘strongly agree’ will be
used for measuring the respondent’s attitude toward SMEs internationalization through
competitiveness, challenges and prospects of Bangladeshi SMEs. It is easy to construct

and administer. Respondents readily understand how to use the scale, making it suitable
for personal interview.

4.4 Sampling process and sample size

The target population will be defined in terms of respondents, sampling unit, extent, and
time. In this research study whose business has fallen under the definition of SME will be
considered as respondent. Sixty three samples will be picked up.

4.5 Data processing and statistical tools

After collecting entire data, process will be guided by the Statistical Software SPSS.
Statistical adjustment of the data may be necessary to make them representative of the
population of the interest.
5. Time and Cost Estimation
5.1. Time: Three Months
2 1 1 1
5 Weeks e e e e
e e e e
ks k k k
Literature review
Duration of Survey
Data analysis and further survey if necessary
Preparation of draft report
Submission of draft report
Comments on draft report

5.2. Budget
Status Amount (Taka)
Principle investigator 5000
Researcher 3000
Research associate 2000
Books and Journals 800
Survey (3 surveyors) 3000
Computer operator 500
Photocopy and others 200
Total 14500

6. Expected Output
From the research study it would be found that the internationalization process of
Bangladeshi SMEs through competition, challenge is working well. Here the research
study will describe some recommendation for the development of our SMEs in the
competition and some guidelines on how to become competitive and face the challenges.
The challenges that SMEs of Bangladesh are currently facing and the challenges that are
coming in future, government budgetary support should be increased in these activities.
However, there are administrative, infrastructural and other constraints, which should be
addressed more and more in the budget and more fund should be allocated for the
improvement of these aspects, which will enhance productivity and efficiency of the
SMEs. Finally a holistic approach is much needed to eliminate these bottlenecks for the
battle of Internationalization