1.

Mission of the Government of Tanzania is to transform small vending into an incubation

centre where small vendors gain skills, accumulate capital and finally graduate into tax payers.
However, a recent study by Tanzania Investment and Consultant Group Ltd (2023) shows that
89% of small businesses close within the initial five years. Explain the factors behind the high
mortality rate of small businesses. Factors behind the high mortality rate of small businesses:

a) Lack of access to finance: Many small businesses struggle to access capital or loans from
financial institutions. This limits their ability to invest in growth, purchase necessary equipment
or inventory, or even cover basic operational expenses. Without adequate financial resources,
small businesses may struggle to survive in competitive markets.

b) Limited market opportunities: Small businesses often operate in saturated or limited markets,
where competition is fierce. This makes it difficult for them to attract customers and generate
sufficient sales. Lack of market opportunities can lead to slow growth or even failure for small
businesses.

c) Poor management and planning: Small business owners may lack the necessary
management skills to effectively run their businesses. This can include inadequate financial
management, poor operational planning, or limited understanding of marketing and customer
acquisition strategies. Without effective management and planning, small businesses may
struggle to adapt to changing market conditions or make informed decisions.

d) Lack of access to resources and infrastructure: Small businesses in developing countries like
Tanzania may face challenges in accessing basic infrastructure, such as reliable electricity,
internet connectivity, or transportation networks. This can hinder their ability to operate
efficiently and effectively, leading to higher costs and lower profitability.

e) Regulatory and bureaucratic challenges: Starting and maintaining a small business often
involves dealing with complex regulatory requirements and bureaucratic processes. This can be
particularly challenging for small business owners who may have limited knowledge or
resources to navigate these requirements. This can lead to delays, additional costs, and
frustration, which may ultimately contribute to business failure.

f) Macro-economic factors: External economic factors can also impact the survival of small
businesses. For example, changes in exchange rates, inflation rates, or government policies can
have a significant impact on the cost of inputs, access to markets, or consumer purchasing
power. Small businesses may struggle to adapt to these changes, leading to higher mortality
rates.

Overall, a combination of financial, market, management, regulatory, and macro-economic

factors contribute to the high mortality rate of small businesses in Tanzania. Addressing these
factors will be crucial for improving the survival and growth prospects of small businesses in
the country.
2. Choosing a legal structure for your business is one of the most important decisions any new
business owner will make. This will have a significant impact on key areas in operating your
business. Explain the factors to consider when selecting the legal business ownership

Selecting the legal structure of a business is an essential decision that can have significant
implications for the business owner, both in the short and long-term. The following are the
factors that business owners need to consider when choosing a legal structure:

1. Liability: One of the most critical factors is the level of liability protection. Business owners
want to make sure that their personal assets are safe in case their business faces legal issues
or lawsuits.

2. Taxation: The legal structure of a business will also determine how taxes are filed and paid. It
is necessary to consider the tax implications of each legal structure. The way a business is
structured affects the taxes payable and the deductions the business can claim.

3. Control: Business owners need to consider the level of control they want over their business.
For instance, sole proprietors or partners in a partnership have full control over the business,
while shareholders in a corporation have less control.

4. Cost: Different legal structures have different costs associated with setting up and managing
the business. It is critical to consider the financial implications of each structure.

5. Ownership and management: The legal structure of a business will determine its ownership
and management structure. Business owners need to consider whether they will appoint
directors or managers to manage the business.

6. Transferability of ownership: Some legal structures have restrictions on transferability of

ownership, while others have fewer restrictions. It is essential to consider how easy it is to
transfer ownership of the business.

7. Future growth: Business owners must consider the potential for growth when choosing a
legal structure. A legal structure that is convenient for a small business may not be the best
structure for a growing business.

In conclusion, choosing the right legal structure for a business is an important decision that can
have significant implications for the success of the business in the long run. Business owners
need to carefully consider the factors above before making a decision. Consulting a legal
professional or accountant can also be helpful in making the right choice.
3. Market research and analysis is the most difficult and yet the most important part in
preparing a business plan. Discuss.

Market research and analysis is indeed one of the most difficult and crucial parts of preparing a
business plan. Here are the reasons why it is considered challenging yet essential:

a) Complexity: Market research and analysis can be complex and time-consuming. It involves
gathering and analyzing data related to market size, trends, competition, customer preferences,
and other relevant factors. The process may require conducting surveys, interviews, focus
groups, and studying industry reports.

b) Uncertainty: The business environment is constantly evolving, and market conditions can
change rapidly. It is challenging to predict and stay updated with these changes, making it
difficult to accurately assess market opportunities and potential risks.

c) Competitor analysis: Understanding the competitive landscape is crucial for the success of
any business. However, identifying and analyzing competitors can be challenging, especially if
they are well-established or have unique and innovative offerings.

d) Limited resources: Small businesses often have limited resources, including time, money, and
personnel. Allocating resources to conduct thorough market research can be a challenge,
especially for new and resource-constrained ventures.

e) Data interpretation: Collecting data is just the first step. Analyzing and interpreting the data
requires specialized skills and knowledge. Business owners need to accurately interpret market
trends, customer behavior, and competitive dynamics to make informed decisions.

Despite the challenges, market research and analysis are essential for various reasons:

a) Identifying target market: By conducting thorough research, businesses can identify their
target market and understand their needs, preferences, and purchasing behavior. This
knowledge is crucial for effective product development, marketing, and business strategies.

b) Assessing market demand: Market research helps in understanding the demand for a
product or service, potential market size, and growth prospects. It provides insights into market
gaps and opportunities, allowing businesses to position themselves strategically.

c) Minimizing risks: Market research allows businesses to identify potential risks, such as
market saturation, intense competition, or changing customer trends. By understanding market
dynamics, businesses can mitigate risks and adapt their strategies accordingly.

d) Competitive advantage: Through market research, businesses can gain insights into their
competitors' strengths, weaknesses, and strategies. This knowledge enables them to
differentiate their offerings and develop a competitive advantage.

e) Business planning: Market research is an essential component of a comprehensive business

plan. It provides a basis for financial forecasting, pricing strategies, marketing plans, and sales
projections.

In conclusion, while market research and analysis may be challenging, it is crucial for the
success of a business. It provides essential insights into the market, customers, and
competition, enabling businesses to make informed decisions, mitigate risks, and develop
effective strategies.

4. With vivid examples from Tanzania, explain how legal environment affect rate and strategy of
small business growth.

15 Marks)

The legal environment plays a crucial role in shaping the rate and strategy of small business
growth in Tanzania. Here are some examples that illustrate the impact of the legal environment
on small businesses in the country:

1. Business registration: Tanzania has implemented policies and regulations to simplify the
process of business registration. For instance, the Business Registration and Licensing Agency
(BRELA) was established to streamline the process and reduce bureaucracy. This has
encouraged more entrepreneurs to formalize their businesses and access various benefits,
such as legal protection, access to finance, and eligibility for government tenders. The ease of
business registration has facilitated the growth of small businesses and enabled them to
operate within a secure legal framework.

2. Taxation and compliance: Tax policies and regulations in Tanzania have a direct impact on
small business growth. Government initiatives, such as the introduction of the Simplified
Taxation System (STS), have simplified tax compliance for small businesses. The STS provides
simplified tax calculations based on business turnover, reducing the administrative burden on
small businesses. These measures have encouraged more entrepreneurs to enter the formal
sector and comply with tax obligations. This has led to increased government revenue and
created a more favorable environment for small business growth.

3. Access to finance: The legal environment in Tanzania affects small business growth by
influencing access to financing options. For instance, the legal framework governing
commercial banks and microfinance institutions determines eligibility criteria, interest rates, and
collateral requirements for small business loans. The government has also introduced policies
to promote financial inclusion, such as the establishment of the Tanzania Postal Bank and the
Tanzania Rural and Urban Roads Agency. These initiatives aim to provide financial services to
underserved areas and support small businesses. A favorable legal environment that promotes
access to finance enables small businesses to secure capital for expansion and growth.

4. Intellectual property protection: Intellectual property rights play a vital role in fostering
innovation and entrepreneurship. The legal environment in Tanzania, particularly the Copyright
and Trademark Acts, provides protection for small businesses' intellectual property. This
creates a conducive environment for innovation and encourages small businesses to invest in
research and development. By protecting their intellectual property rights, small businesses are
more likely to attract investment, enter new markets, and grow their ventures.

5. Government policies and support programs: The legal environment influences the rate of
small business growth through government policies and support programs. Examples include
the National Entrepreneurship Development Policy, which provides support for small businesses
through training, mentorship, and access to finance. The government also implements
programs such as the Small Industries Development Organization Act, which establishes
institutions to offer technical support and infrastructure for small businesses. These policies
and programs provide a supportive legal framework that encourages small business growth and
facilitates their integration into the economy.

In conclusion, the legal environment has a significant impact on the rate and strategy of small
business growth in Tanzania. Policies related to business registration, taxation, access to
finance, intellectual property protection, and government support programs shape the operating
environment for small businesses. A favorable legal environment reduces barriers to entry,
promotes compliance, facilitates access to financing options, protects intellectual property
rights, and provides support for small business growth. These factors contribute to an enabling
landscape for small businesses to thrive, contribute to economic development, and create
employment opportunities.

5. The Government of Tanzania has indeed implemented various policies and programs to
support the development of the Micro, Small, and Medium Enterprises (MSME) sector. Here are
five relevant policies that justify this statement:

a) National Micro, Small and Medium Enterprises Development Policy (2013): This policy aims
to facilitate the growth and competitiveness of MSMEs by providing a supportive environment.
It focuses on capacity building, access to finance, technology transfer, and export promotion.

b) National Entrepreneurship Development Policy (2016): This policy focuses on promoting

entrepreneurship and innovation in the country. It offers support through training, mentorship,
access to finance, and creating an enabling business environment for MSMEs.

c) Small Industries Development Organization Act (SIDO Act, 1973): This act establishes the
Small Industries Development Organization (SIDO) to provide technical support, training, and
access to finance for MSMEs. It also establishes industrial estates to help businesses access
affordable infrastructure.

d) National Industrial Development Policy (2019): This policy promotes industrialization by

creating an enabling environment for MSMEs. It emphasizes addressing challenges related to
infrastructure, access to finance, technology adoption, and market access.

e) Tax incentives and exemptions: The government provides tax incentives and exemptions to
promote the growth of MSMEs. These include tax holidays, reduced tax rates, and simplified tax
procedures for small businesses. These incentives help to reduce the financial burden on
MSMEs and encourage their development.

These policies and programs demonstrate the government's commitment to supporting the
development of the MSME sector in Tanzania. By addressing various aspects such as access to
finance, technical support, market access, and policy frameworks, the government aims to
create an enabling environment that fosters MSME growth and contributes to the country's
overall economic development.
5. The Government of Tanzania has indeed implemented various policies and programs to
support the development of the Micro, Small, and Medium Enterprises (MSME) sector. Here are
five relevant policies that justify this statement:

a) National Micro, Small and Medium Enterprises Development Policy (2013): This policy aims
to facilitate the growth and competitiveness of MSMEs by providing a supportive environment.
It focuses on capacity building, access to finance, technology transfer, and export promotion.

b) National Entrepreneurship Development Policy (2016): This policy focuses on promoting

entrepreneurship and innovation in the country. It offers support through training, mentorship,
access to finance, and creating an enabling business environment for MSMEs.

c) Small Industries Development Organization Act (SIDO Act, 1973): This act establishes the
Small Industries Development Organization (SIDO) to provide technical support, training, and
access to finance for MSMEs. It also establishes industrial estates to help businesses access
affordable infrastructure.

d) National Industrial Development Policy (2019): This policy promotes industrialization by

creating an enabling environment for MSMEs. It emphasizes addressing challenges related to
infrastructure, access to finance, technology adoption, and market access.

e) Tax incentives and exemptions: The government provides tax incentives and exemptions to
promote the growth of MSMEs. These include tax holidays, reduced tax rates, and simplified tax
procedures for small businesses. These incentives help to reduce the financial burden on
MSMEs and encourage their development.

These policies and programs demonstrate the government's commitment to supporting the
development of the MSME sector in Tanzania. By addressing various aspects such as access to
finance, technical support, market access, and policy frameworks, the government aims to
create an enabling environment that fosters MSME growth and contributes to the country's
overall economic development.
6. The Uppsala model of internationalization is a theoretical framework that explains how small
businesses gradually expand their operations in foreign markets. It highlights two key strategies:
market development and market penetration. Here are the advantages of the market
development strategy over the market penetration strategy:

a) Minimizing risk: Market development involves entering new markets with new products or
services. This strategy allows small businesses to diversify their customer base and reduce
reliance on a single market. By expanding into new markets, businesses spread their risk and
decrease vulnerability to fluctuations in domestic demand.

b) Access to new opportunities: Market development allows small businesses to tap into
untapped markets and target new customer segments. It offers opportunities for growth and
increases market share. By identifying and capitalizing on emerging markets or niche segments,
businesses can gain a competitive advantage and expand their reach.

c) Higher profitability: When small businesses enter new markets, they often face lower
competition compared to their domestic market or highly competitive markets. This lower
competition can lead to higher profit margins and increased profitability. Businesses can set
higher prices or enjoy cost advantages in new markets, translating into improved financial
performance.

d) Learning and knowledge accumulation: Market development strategy requires businesses to

engage with new markets, cultures, and customer preferences. This process leads to
knowledge accumulation and learning. By understanding diverse markets and adapting to their
specific demands, small businesses can become more agile and better equipped to succeed in
future international ventures.

e) Enhanced brand reputation: Expanding into new markets and successfully penetrating them
can enhance the brand reputation of small businesses. It signals credibility, reliability, and
adaptability in serving diverse customer needs. A strong brand reputation can attract further
international opportunities and partnerships while solidifying the business's position in existing
markets.

In conclusion, the market development strategy offers significant advantages over market
penetration for small businesses. It provides access to new opportunities, minimizes risks,
increases profitability, enables knowledge accumulation, and enhances brand reputation. By
gradually expanding into new markets, small businesses can diversify their operations and
thrive in a globalized business landscape.
6. The Uppsala model of internationalization is a theoretical framework that explains how small
businesses gradually expand their operations in foreign markets. It highlights two key strategies:
market development and market penetration. Here are the advantages of the market
development strategy over the market penetration strategy:

a) Minimizing risk: Market development involves entering new markets with new products or
services. This strategy allows small businesses to diversify their customer base and reduce
reliance on a single market. By expanding into new markets, businesses spread their risk and
decrease vulnerability to fluctuations in domestic demand.

b) Access to new opportunities: Market development allows small businesses to tap into
untapped markets and target new customer segments. It offers opportunities for growth and
increases market share. By identifying and capitalizing on emerging markets or niche segments,
businesses can gain a competitive advantage and expand their reach.

c) Higher profitability: When small businesses enter new markets, they often face lower
competition compared to their domestic market or highly competitive markets. This lower
competition can lead to higher profit margins and increased profitability. Businesses can set
higher prices or enjoy cost advantages in new markets, translating into improved financial
performance.

d) Learning and knowledge accumulation: Market development strategy requires businesses to

engage with new markets, cultures, and customer preferences. This process leads to
knowledge accumulation and learning. By understanding diverse markets and adapting to their
specific demands, small businesses can become more agile and better equipped to succeed in
future international ventures.

e) Enhanced brand reputation: Expanding into new markets and successfully penetrating them
can enhance the brand reputation of small businesses. It signals credibility, reliability, and
adaptability in serving diverse customer needs. A strong brand reputation can attract further
international opportunities and partnerships while solidifying the business's position in existing
markets.

In conclusion, the market development strategy offers significant advantages over market
penetration for small businesses. It provides access to new opportunities, minimizes risks,
increases profitability, enables knowledge accumulation, and enhances brand reputation. By
gradually expanding into new markets, small businesses can diversify their operations and
thrive in a globalized business landscape.