Small And Medium Enterprises In Oman Economics Essay

Recent decades have been marked by the rapid internationalization of business and the emergence of global competition. Markets in many industries, whether for consumer products, industrial goods and services or markets for resources such as capital, materials and technology, are becoming increasingly integrated worldwide (Craig and Douglas, 1996) [1] . At the same time, the formation of various trade agreements and the establishment of liberal trade policies by both developed and developing countries has resulted in the abolition of protectionist measures and the removal of most trade barriers, As result, virtually all firms, irrespective of size, industry or national origin, are now confronted with the consequences of this new commercial reality, and have realized that choosing not to participate in global markets may no longer be an option (Craig and Douglas, 1996) [2] .

Madhoun & Analoui (2004) [3] contend that Micro and Small Enterprises (SME’s) occupy an important and strategic place in the economies of all countries as they contribute significantly to wealth and employment. All the foretasted benefits of Small and Medium Scale Enterprises cannot be achieved without the direct intervention of the government. SME entry mode choice has been considered one of the most important new research fields on internationalization of firms (Jones, 1999; Burgel, and Murray, 2000) [4] 5. Over the years a number of Market Entry Strategies have been formulated by the government with a view to developing Small and Medium Scale Enterprises. Therefore it is visible that there are several factors which challenge the success of small business. Apart from these challenges, there are several strategic options which will help SMEs to overcome these challenges. Awareness of these issues and challenges and the strategic options in this field is very important factor to these SMEs in Oman for the development of this sector.

This proposal research will discuss deeply the impact of foreign market entry strategies of SMEs on their performance in Oman. In particular, the research will examine several Market Entry Strategies aimed at developing business performance of Small and Medium Scale Enterprises in Oman and focus on evaluating the most appropriate market entry strategies that SMEs should consider prior to penetrating market. The researcher will establish the objectives of the study and will formulate the research statements. Then he will state questions and finally, the methodology to be used is discussed.

1.2 Research Problem

SMEs in Oman, as in other countries, are still facing a number of difficulties and obstacles that are complicating their growth and performance. Firm`s growth and performance are much affected by marketing strategy, and specifically through market entry strategies. Many market entry strategies have been identified by researchers can enhance SMEs performance if these strategies are followed in their business operations there should be improving the performance of the business.

There are few studies that link market entry strategies of SMEs with its performance. The intent of this study is to fill these research gaps by producing empirical evidence to clarify the relationship among SMEs, market entry strategies and organizational performance. The fundamental research questions are whether SMEs and market entry strategies are linked from a performance perspective and whether this link adds to the bottom-line of organizations. The study attempts to improve understanding of the issues that have theoretical and practical relevance. A combination of quantitative (survey research) and qualitative (case studies) research was

In this study the researchers considered only about the market entry strategies adopted by SMEs and its impact on business performance. Therefore it is important to measure the impact of market entry strategies in term of performance for SMEs in Oman.

1.3 Research Questions

The study considers the need of the SMEs to increase their performance due to the increased impacts of the external environment such as economic crisis, competition, and globalization. The researcher can extract several questions to help the study achieve the proposed objectives.

1. What is the impact of foreign market entry strategies of small and medium enterprise on their performance in Oman?

2. What is the impact of exporting strategy of small and medium enterprise on its performance in Oman?

4. What is the impact of joint venture strategy of small and medium enterprise on its performance in Oman?

5. What is the impact of licensing strategy of small and medium enterprise on its performance in Oman?

6. What is the impact of foreign direct investment strategy of small and medium enterprise on its performance in Oman?

1.4 Research Objectives

The main objective of the study is to identify the impact of market entry strategies for SMEs in Oman in terms of the organization’s performance. The second objective is determining the appropriate market entry strategies that can be used by the SMEs which lead to improvement in their performance. The specific objectives are to examine the market entry strategies available for SMEs in terms of its performance; and to determine the main barriers to enhance performance of SMEs;

1.5 Justification (Rationale) for Research

Nowadays the globalization of markets has been one of the hottest topics of discussion among academic researchers and business practitioners during the past 25 years. The successive governments in Oman have continued to articulate policy measures and programme to achieve a sustainable industrial growth and development, through appropriate marketing strategies. No study has been available that link between market entry strategies and performance which can be used by SMEs. The researcher hopes that the findings of the research would contribute to the growing body of knowledge on SME`s market entry strategies specifically in terms of performance in the Omani context. It is also hoped that researchers on entrepreneurship would benefit from this study, directly or indirectly, in terms of the research approach and the applicability of results, among others.

The output of this study can be used as a source in variety of ways such as: (1) baseline data for Small and Middle Enterprise (SMEs) to enhance their performance through market entry strategies. (2) basis for policy formulation and implementation by the local and national government in regulating and reinforcing small business industry; and (3) reference for future comprehensive study in the field of market entry strategies.

1.6 Statement of the Hypothesis

The research work sets out to test the following hypothesis:

H0: Foreign market entry strategies of small and medium scale enterprises do not enhance their performance in Oman.

H1: Exporting strategies of small and medium scale enterprises do not enhance their performance in Oman.

H2: Joint venture strategies of small and medium scale enterprises do not enhance their performance in Oman.

H1: Licensing strategies of small and medium scale enterprises do not enhance their performance in Oman.

H1: Foreign direct investment strategies of small and medium scale enterprises do not enhance their performance in Oman.

1.7 Research Methodology

The proposed approach of the study is the use of descriptive approach and using both the primary and secondary data. The secondary data will be collected from the previous studies in the books, newspapers, websites and journals. The method will enable the study to evaluate the effectiveness of the different foreign market entry strategies that are mostly applied by the SMEs in terms of performance. In addition, the primary and secondary data can establish the conceptual framework for these strategies which can be applied specifically in the issues of globalization. The questionnaire is the approach which is used to collect the data in this research. Mcdonough and Mcdonough (2008) [6] sited that to get data for the research; there are two types for asking people questions which are interviews and questionnaires. Kuter and Yilmaz (2001) [7] added that the questionnaire is very benefit to get the data because you can ask many people the same questions in short time. Kuter and Yilmaz (2001) [8] gave that questionnaires are not very expensive like other ways or tools of collecting data and if you use the online questionnaire it is very easy to distribute and analyse. So, the researcher chose to use the questionnaire because it helps to get the ideas of a huge number of people but the interviews are giving the ideas of a few numbers of people. Furthermore, it is very easy to analyze the questionnaires.

In order to achieve the study objectives, the researcher will use analytical descriptive approach which includes sequent of procedures such as identification the population of the study as well as its dimensions and determination study tools to measure the dimensions which we are going to study it. The researcher will use a representative sample which includes all SMEs available in different industrial areas in Oman. The researcher will divide his study into dimensions including the importance of market entry strategies for SMEs in Oman, the evaluation of existing market entry strategies available for SMEs in Oman to measure specifically the extent of satisfaction about those strategies in terms of performance.

1.8 Research Limitation

Several limitations can be seen due to the time and cost constraints. The study is only focused on the manufacturing sector due to its significant contribution to the national economy.

CHAPTER TWO: LITERATURE REVIEW

2. Literature Review

2.1 Introduction

It refers to any company or individual establishment that operates within a certain industrial sector and have a registered capital exceeding $42,300 and more than ten registered employees within the social security program. Bethke & Raynard (2003) [9] states that the contribution MSEs makes towards economic development in developing countries cannot be understated. Allal (1999) [10] support these researchers by stating that MSEs are considered main engines of economic growth. Hodgetts and Kuratko (1995) [11] also suggest that small businesses not only create employment but are the economic engines driving the global quality of life (Hills, 1995) [12] . Bridges (2002) [13] , states that micro, small, and medium enterprises are often the backbone of the private sector in developing world and creating jobs. As per Cagliano et al. (2001) [14] , ‘small enterprises score significantly low on practice related to long term planning and strategic management, such as business vision, manufacturing planning and strategy and performance management as compared to medium enterprises. Batra and Mahmood (2003) [15] support public policy initiatives and call for creating and enabling environment for the development of small business. World Bank Report (2004) [16] despite the success of SMEs strategies in some countries, the majority of developing countries have found that the impact of the SMEs development programs on enterprise performance has been less than satisfactory.

Implementation of international market diversification strategy involves the development of a comprehensive product/market plan that includes choosing a foreign market entry mode (Root, 1987) [17] . Foreign market entry mode is defined as institutional arrangements that allow firms to use their product or service in a country exchange (Calof, 1993) [18] . Entry modes vary in the degree of control the firm has over invested tangible and intangible resources, and the transactions costs associated with that resource commitment (Anderson & Gatignon, 1986; Domke-Damonte, 2000) [19] 20. In terms of the performance implications of internationalization, evidence supports the idea that foreign market entry, regardless of mode, significantly increases returns on sales and assets (Daniels & Bracker, 1989) [21] .

2.2 Small and Medium Enterprises in Oman-An Overview

Oman is a country with unique features. It is a developing and an oil producing country. Oman is a country where there are ample scopes for the local people to generate income from different sources especially after the introduction of Omanisation policy. According to the (Ministry of National Economy,2010) [22] the total number of SME units registered in Oman in 2009 is 118,386 and contribute around 23% of the gross domestic product (GDP) which are scattered in four governorates, Muscat, Dhofar, Musandam and Al Buraimi and five regions, Al Batinah, Al Dhahirah, Al Dakhliyah, Ash Sharqiyah and Al Wusta. According to the Oman Ministry of Commerce and Industry, SMEs represent more than 90% from the total number of enterprises in Oman. These estimation show a considerable potential for the Omani`s SMEs to grow and to be competitive at local and international level. This paper offers contributions to international business studies by providing a conceptual framework of market entry strategies that enhance Omani`s SMEs’ business performance.

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3. Conclusion

Small and Medium Scale Enterprises constitute essential ingredients in the lubrication and development of any economy. In Oman, the story makes no remarkable difference as Small and

Medium Scale Enterprises dominate the economy. Government over the years has formulated a number of policies aimed at developing Small and Medium Scale Enterprises. SMEs throughout the world have been considered as the silent drives of a nation’s economy. Their enterprise is laudable and their ability to generate pools of growth and employment, invaluable. This is true for most developed, as well as developing economies.

In the emerging economic order SMEs are the leading edge when it comes to innovation and entering new global markets. The SME story in the Sultanate is not different. SMEs form the backbone of Oman’s economy. The studies show that SMEs’contributions towards GDP and employment creation in Oman is far below when compared to other developed and developing countries. Many failures in SME sectors reported in the past few years were due to the absence of efficient management systems especially the effective market entry strategies in the enterprises. A study of the marketing strategies of SMEs of Oman particularly the market entry strategies will give light to the real issues of this sector and thereby strengthen the very base of the SMEs in Oman.