Marketing Problems faced by MSEs
line of MSE activities in Ethiopia is relatively similar. A lack of product
diversity, however, is prevalent and as a result similar products are
over-crowding the market. Some micro enterprises shift from one product to
another, and in doing so, capture better market opportunities. Nevertheless,
as soon as the market has established itself, a multitude of further micro
enterprises start off in the same business and this causes the selling price
to fall immediately.
Furthermore, certain MSEs lack
the skill to modify their products, such as handicraft products, pottery,
furniture, metal products, kitchenware etc. There is also lack of sufficient
range of product designs. Most products that are made available by MSEs can
also be obtained from medium-sized enterprises that mostly have market
advantages in terms of their size alone.
following are the most important problems in relation to price. Some MSEs
sell at break-even or even below cost. Some of the reasons for selling at
such a lower price can be attributed mainly to:
basic costing knowledge;
costs are mostly not calculated as expenses;
that salaries or wages of family members involved in production or sales
are overlooked as cost product;
knowing the exact earnings from sales separately;
at the end of the day all family members spend the money earned from sales
manufacturers do not correctly know how much raw material and accessories
are required to make one unit of a product.
Most MSEs do
not know whether they actually make profit or not. They express their
success only by accentuating the changes they make. Examples:
installation of new electric and water line;
radio, cupboard, or other furniture;
goat for milking;
children to school;
their small house;
relatively more food compared to what they used
MSEs tend to overprice their products, with some under-pricing due to lack
of costing skills as well as competition.
instances MSEs are forced to sell at any lower price, due to the existence
of larger enterprises, which sell similar products with reduced prices. For
instance, during peak seasons farmers from the vicinity take products such
as vegetables, pepper, seeds, charcoal, or wood to the towns and sell them
on common market days. During such periods the MSEs are forced to sell at a
lower price unless the demand is higher compared to the supply.
enterprises that work in 'gulit' areas do their business on the sidewalk or
by the roadside. The majority of them sell products such as tomatoes,
onions, seeds, 'enjera', 'teff', and pottery products. Traders in this
category face problems such as:
products being exposed to too much dust;
products are exposed to high risk of breakage;
result of poor environmental hygiene, food items get spoiled;
limited market outlets for some products.
products such as bread, 'enjera', milk and others are sold on a door-to-door
basis. In areas where such services are of frequent practice the relatively
bigger enterprises must follow the same offering not to loose market share.
This makes the competition stiff.
family members with limited business management and salesmanship (mostly
children) are involved in the operation of their respective family
businesses. In such cases owners fail to control the daily sales
transactions of the business. Most of the MSEs lack marketing skills. There
are cases where they buy a product, which is momentarily not of constant
cases, MSEs have limited means in obtaining effective and relevant data as
well as information on market availability that can be obtained from
Chambers of Commerce, MSE Development Agencies, associations as well as
Trade, Industry and Tourism Bureaux. Nevertheless, MSEs have difficulties in
getting their hands on adequate data and information. One of the reasons for
this deficit is that many of the centres are not within the reach of most
who plan without adequate information or with redundant data can find
themselves in a situation of danger that cannot be easily remedied!
usually intend to sell in an area far from their location are curbed in
their selling activities due to the limited quality of infrastructure and
high transportation costs.
Shortage and lack of
infrastructure such as adequate roads as well as, telecommunication and
electricity facilities are all that prevent effective operation of MSE
This fact results in MSEs being
unlikely to sell to distant areas located far from their territory.
though most MSEs have a good reputation in a certain community they can
easily sell to tri-areas, however, if the infrastructure does not cater
for their needs then this will represent an enormous hindrance to
related to the promotion of products are listed below:
plan on promoting their products, however, their budget is mostly tight.
though some enterprises understand that issuing flyers, posters and
business cards have promotional values, they refrain from undertaking such
promotional activities to use the money for other urgent matters.
are not correctly informed on how to join their respective Chambers of
Commerce, or trade association of their industry. They seem not to be
aware of the services that they could obtain from chambers and
associations such as:
organizing trade fairs;
advertising MSEs' products;
assisting MSEs in finding
solving general market
that have previously participated in trade fairs fail to follow up, simply
due to lack of awareness and skill. Most MSEs are of the opinion that a mere
participation in trade fairs is enough to promote their products.
As is mostly
the case and common recognition, "Competition is Cruel", which implies that
some larger companies in relation to MSEs have advantages due to:
reduced price without reducing product quality using economies of scale;
intensified product/service advertising capacity;
personal contacts and networks;
information regarding existing market and capacity to exploit more market
is not only between the MSEs and the relatively bigger companies. There is
also competition among operators within the MSE sector itself and between
MSEs that are engaged in the same line of business. The latter is what
concerns MSEs more than competition from the big companies, because they
serve different market segments and target clients. The target clients for
the MSE sector, in most cases, are people with lower level of income and
with the need to invest rather on consumption goods/services than making
long-term capital investments.
among the MSEs is based on:
to keep quality of product/service to acceptable standards or as per the
needs of the customers. Product quality can be achieved through various
means such as using raw material with good quality, using improved and
efficient production process/technology, proper finishing, and good
storage facilities - both for raw material and finished products and use
of skilled labour;
competitive price, i.e., setting product/service price at a reasonable
amount compared to that of similar suppliers. Price reduction makes sense
whenever it is possible for the operator to reduce his/her production cost
through any possible means, but without sacrificing product quality.
Efficient control over resources such as raw material, labour,
tools/equipment, money, time, information, etc. are vital to control
costs. The more costs are minimised the more the entrepreneur can reduce
the selling price and attract a larger number of clients;
of strategic location where customers can easily be obtained as well as
easy accessibility of the enterprise to them;
product/service through possible cheap means, without incurring a high
level of costs;
of specific target markets or clients that the business can efficiently
respond to their needs and purchasing power;
salesmanship and customer relation.
Example for competition in terms of quality:
bakeries use 'white flour', while others use 'dark wheat powder ' to bake
bread. Consumer preferences are more for white bread presently and, as a
consequence, sellers of dark bread loose market shares. What makes this
really a bad situation is that they do not even know the reason for the
Example for competition in terms of price:
'gulit' areas the spacing between the selling stands are at a minimum, which
invites some smart sellers to adjust their selling prices after hearing the
offered prices of their neighbouring seller. This enables them ultimately to
grasp more clients.
Lack of Market related
Due to this
aspect being very vital to overcome marketing problems, the crucial points
that MSEs are unable to meet are manifested by:
lack of information where the
best market areas are located;
to analyse their respective market;
skills to set competitive prices;
to effectively promote products.
The fact is
that, in most cases, market studies are not carried out before a venture is
undertaken within the market. This is also the case with regard to research,
where during the life span of the enterprise no market research takes place.
some organizations are helping MSEs to build their marketing knowledge,
there is resistance on the part of many MSEs, mainly due to the low level of
entrepreneurial awareness. On top of that, the experience of MSEs is
confined only to local conditions and they are not well aware of what is
going on in other parts of the country. In many cases people responsible for
selling MSEs' products are family members, lacking general knowledge of
marketing. Furthermore, business and family affairs are intertwined.
has shown that many MSEs refuse or resist attending training programs that
would help them enhance their marketing skills. They consider attending
training programs as a waste of time. They rather give more emphasis on not
missing a single daily sales opportunity. Many justifications can be given
as to why MSEs do not like participating in training programs. Maybe the
training is too much offer-oriented (supply-led) and does not meet the
priorities of the MSEs, maybe its time schedule is not appropriate or MSEs
are not well informed of the benefits the training can bring them.
experience obtained from a local NGO known as Progynist has shown that the
majority of its target MSEs prefer to attend training programs during
mornings and evenings as well as on non-busy market days to spare their
productive time to conduct business activities. Once the MSEs taste the
benefits of the training, they opt to taking further training. It is
therefore necessary to make training to MSEs need-based, scheduled to take
place without interrupting normal business operations as much as possible
and make additional efforts to raise MSEs' awareness on the importance of
may have the need for retail stores, in order to sell their products, but do
not have the necessary retail outlets. In this case they are obliged to sell
products on market days only. In some areas, where soft drinks and beer are
sold, the area may be 'dull and ragged'. In addition, consumers prefer going
to a better and active area. In such situations, food and local
drinks/beverage sellers lose access to the market, with household consumers
remaining their only customers.
engaged in activities such as shoemaking, furniture production, metal works,
photography, hairdressing and catering might have relatively substantial
number of customers provided that they are strategically located and have
good salesmanship. However, accessing premises in good locations may not be
easy for MSEs. There may be the problem of infrastructure as well as high
rent for the premises. In one way or another, it is necessary for the MSEs
to find out retail outlets to reach their customers.
discussing marketing problems the subject of finance should not be
overlooked. Shortage of funds discourages the smooth operation and
development of MSEs. Even if there are credit facilities, some of the MSEs
do not use the money for the intended purpose. They rather divert it for
other unintended and non-productive expenditures. Consequently, the
enterprises fail to return the money back to the lender on time. This can
result in a loss of credibility to get repeated loans when needed most. In
order to minimize the impact of shortage of working capital MSEs should be
and Source of Energy
months of July to September farmers are mainly engaged in farming
activities. Due to this fact there will be a shortage of fuel wood and
charcoal that are needed by MSEs producing local food items such as
'ambasha', 'dabo’, 'enjera' and local drinks like 'areki'. In such cases
they are forced to use wood shaving and oil cake for fire. The smoke from
these materials results in environmental pollution affecting their health.
of raw material on credit from some suppliers would be seen as an
opportunity for MSEs to overcome working capital problem. For instance,
there are cases where cereals like 'teff' and wheat, which are required for
production of 'enjera' and 'ambasha/bread' respectively are supplied to the
operator on credit terms. Some plywood sellers also give lump of wood on
credit to the furniture manufacturers. Yet, the receivables take longer time
than expected, mostly after the MSEs suffer a lot from shortage of cash.
There are also cases where suppliers consider credit sales only for raw
materials with inferior quality. In such cases MSEs should take care of
using such poor quality raw materials, which directly reflect on the quality
of finished products.
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