Strategies, Barriers & Export Performance of Nigerian SMEs

This report delves into the internationalization strategies, barriers, and export performance of small and medium enterprises (SMEs), particularly within the Nigerian agribusiness sector. It highlights the significance of agriculture in Nigeria's economy and the need for Nigerian SMEs to embrace internationalization to overcome challenges and barriers. The report identifies financial, managerial, industry-specific, and intellectual property barriers that hinder international expansion. It explores the benefits of free trade, technological advancements, and expanded customer bases, while also examining knowledge, resource, and procedural barriers. The analysis emphasizes the importance of financial planning, entrepreneurial orientation, and government support for SMEs to succeed in international markets. Furthermore, the report discusses various types of barriers, including knowledge, resource, and procedural barriers, affecting the economy and businesses in Nigeria. The report also underscores the necessity of addressing these barriers to foster the growth and competitiveness of Nigerian SMEs in the global market.

STRATEGIES FOR SMALL AND MEDIUM ENTERPRISE INTERNATIONALIZATION AND BARRIERS
OF INTERNATIONALIZATION AND EXPORT PERFORMANCE OF LOCAL AGRICULTURAL
BUSINESSES IN NIGERIA

Chapter 2: Literature Review
Introduction to The Nigerian Agribusiness industry
Nigeria has the biggest economy in Africa where agriculture remains the largest sector of its
Nigerian economy and employs two-thirds of the total labour force; the production hurdles
have significantly stifled the performance of the sector. Over the past 20 years, value-added per
capita in agriculture has risen by less than 1% per cent annually (Elkington, 2018).
The subsistence farming segment is needed for the awareness of quick populace development.
The subsistence farming or the subsistence agriculture is considered as the mode of agriculture
under the plot of land as it produces only for food in order to feed the family or the small
community under working on it. The successful subsistence farming system can be shared with
a similar type of structural traits (McAdam, Bititci, & Galbraith, 2017). It is found from the
history that Nigeria is well in agribusiness management. It is one of the countries which are
engaged in the activity of agribusiness. Responding to the needs of the hour it becomes prime
importance for the Nigerian Small and medium agribusiness enterprises to go
internationalization. It is often found that while planning to internationalize, the process may
involve a lot of challenges and barriers. But Nigerian small and medium scale agricultural-based
enterprises should respond to the challenges in an effective manner and some of these barriers
can be identified below
Internationalization and its benefits in SMEs:
One of the big benefits for internationalization is free trade. The barriers and the tariffs within
the countries as well as continents provide more freedom in order to import or export various

products from. There is modern technology and the engineering are found to provide the world
with the opportunity for moving the products as well as the information with faster and
cheaper rate. It also provides the companies in case of the possibility of easily expanding
products and services for the larger customer base. The consumer can achieve the profits from
the free trade as like the companies as they can lower the process for the products as well as
services through the more open market (Baumgartner & Rauter, 2017). It is the ability for
choosing the products and services from the large selection which will push the companies in
case of competing with each other; it will lead the lower prices for other kinds for benefits
consumers.
The labour and the knowledge movement can move around and thus it has provides the
knowledge and skills for the highest bidder. Thus it is easier for future workforces in order to
educate themselves or they will get more knowledge from other places because of the
knowledge movement due to the internationalization (Kotabe & Murray, 2018).
Barriers of SMEs Internationalization:
Some example of SMEs barriers are- financial barriers, managerial barriers, industry and firm
specify barriers and so on. The financial barriers thus have been checked as particularly
significant for the SME where there are the novel products as well as technologies (Cheong,
Song, & Hu, 2016). In this respect, from some past research, it has been found that it holds for
the organization as it relies heavily in the case of advanced knowledge as per the instance from
the research institutes or for the universities. The researchers Kotabe & Murray (2018), in his

research conclusion and findings highlighted that it is very important to remove the barriers for
internationalization in an effective manner. It is because removing the barriers by implementing
the strategies as those are needed of the hour to make the small and medium agriculture
enterprise effective and healthy (Kotabe & Murray, 2018).
It is the Intellectual Property Right (IPRs) which is more significant at this respect. So this area is
found to exist as the considerable body for review. These SMEs needs to check the form of IPR
in practice in situations where they employ innovation. Those firms are found significantly in
that respect. So SMEs is needed to check that it is not affected by the financial constraints
(Meyer & Peng, 2016). Those firms which are found to engage in both the case of innovation as
well as internationalization is found as the innovation activities which are hampered by the
financial issues.
Nigerian SMEs have thought of new ways or better methodologies for preparing for
internationalization with the objective that they are appealing to the worldwide market. It
takes an ambitious concentrated firm in Nigeria to present a huge amount of money for
conveying without considering the high risk portrayed in going abroad and internationalizing
(Ali, 2018). Most SMEs will go to the level of getting loans from the banks, using their homes as
assurance security without considering the last result of losing their homes with the true
objective of developing international markets (Brea Solís, Casadesus Masanell, & Grifell Tatjé,‐ ‐ ‐
2015). Ambitious centred SMEs in Nigeria can progress along these lines be recognized as firms
with a capacity to proactively look for a business establishment that is innovative paying little
attention to the risks included. For a firm to have the ability execute its plans to go into foreign
markets, the firm needs to have the ability and capacity to internationalize, such as a strong

financial base and business research knowledge on the market they intend breaking into. It is
basic for SMEs looking to internationalize to consider its strengths and weaknesses in
accordance with the aims of establishing its business internationally putting into consideration
the objectives of the business and the changes or level of uncertainty that may arise and alter
the business focus. It has been perceived by (Hermannsdottir et. al. 2007) that resourceful
performance can be critical in achieving firm execution in a foreign market if the internal and
external parts are put in place or considered and put in place.
On the other hand, the significance of the entrepreneurial management is found to survive as
well as operate within the firms which are recognized within the entrepreneurship writing. It is
the best way to provide the Entrepreneurial orientation is called the capacity for participating
the innovative processes for attempting the degree for risky ventures as well as taking part with
the proactive developments. It has been characterized that there are some Nigerian SMEs
setting up for administrations so that they can approach bundling of items related to become
the global purchasers (Meyer & Peng, 2016).
According to (Goldman, 2018) Nigerian agribusiness organization is facing a financial problem
which is a potential hindrance or blockage in taking decision for going international operation.
In his research study, thus the author (Goldman, 2018) has mentioned that the Nigerian
agribusiness organization needs to strengthen its financial condition in order to effectively go
for international operation effectively and efficiently. In the research conclusion, the author
mentioned that Nigerian small and medium agro-based organization are lacking innovative
tools and equipment which is preventing them from operating at an international scale. As
already mentioned, the main reason for this is the lack of financial planning (Goldman, S. 2018).

Hence, it can be argued that Nigerian small and medium agri based organization must need to
have proper financial planning in a way to avail the opportunity to operate at an international
level.
Nigeria SMEs has governed and administered through internal management, the government
along with the medium scale agro-based undertakings. This sector has some ability in the
making of mass demanded things which are consumed in homes and ventures. Nigeria is one of
the primary countries in the age of cultivating things. For example of natural items, like cassava,
yam, cowpea and cocoa and some regular items, like verdant and root vegetables, grain
vegetables and animal things. Only, for this reason, a good amount of mass is from the SMEs.
These environmental friendly things are exceedingly fleeting and records of postharvest
setbacks. Those things are highly available in Nigeria and thus it has been represented that
Nigerian cultivation perseveres through the disasters as much as possible for the vegetables,
30% for roots and tubers, and 20% for grains (FMARD, 2001). This example is counterproductive
and does not bolster agro-based money related improvement with a significant agrarian
economy.
Types of Barriers:
There are many types of barriers due to internationalization which affects the economy and
business of Nigeria as well as in other parts of the world. Within those there are knowledge
barriers, resource barriers, procedure barriers or the exogenous barriers as described below:

Knowledge barriers
Other than the financial issues Nigeria has faced the problem in the field of knowledge barrier.
There are four sources which represent this export barrier as it affects the activities which
include the internal resource constraints, exogenous variables, export knowledge along with
the procedural barriers (Fransen, Verlegh, Kirmani & Smit, 2015). These export knowledge
barriers thus refer to the lack in the case of information as it is related to the export activity. As
per the pioneering work which can be defined as the total market knowledge on the basis of
the internationalization, it is needed to assert that there is a lack of knowledge within the
foreign markets which constitute the barrier as it will increase the commitment for
international activity among the company (Genus, Rigakis, & Dickson, 2003). It is also found
that there are many things which are identified as the knowledge barriers, like the lack of the
awareness for the export assistance, the lack of awareness of the benefits for the export
markets (such as higher sales, profits and channel expansion etc), the lack of the knowledge for
the best potential markets and the lack of the qualified staff which has the overall knowledge as
they want to enter the export market.
Resource Barriers
There are several studies which have been identified through the internal resources as per the
impediment as it limits the ability for the firms to export. The following factors which are being
highlighted with the internal resource barriers and there are the lacks of financial resources as
it is necessary for the fund's requirement as they are initiating the operation of the finance
export. As per Genus, Rigakis & Dickson (2003), in the case of Nigeria, the additional barrier

that is needed to identify as the internal constraints which hamper the export activity. It is
needed to utilize the honouring letters for crediting which has been found due to the lack of
personnel in order to devote the time for the export activities (Genus, Rigakis, & Dickson,
2003). Moreover, a firm needs a various number of external support resources, like banks
which are willing to support the international activities of the organizations or in the case of
local trading firms which enable export operation of manufacture indirectly.
Procedure Barriers
It is needed to identify the limit of export activities as per the factors which are pertaining to
the procedural barriers. As per Elkington (2018), the SME’s of Nigeria are found to be interested
in case of exporting their faces with the number for the procedural barriers. Those procedural
barriers are found to relate with the activity itself as it has the origins for the firms within the
domestic market for the foreign markets (Elkington, 2018). As per Baumgartner & Rauter
(2017), procedural barriers at the reference of Nigeria it is subdivided within two types, one is
controllable and that can be easily resolved and another is not controllable which requires the
case-by-case decisions as it is independent for the routine as it is found to acquire through the
experience, like the non-tariff barriers. It is based on the relevant export that the literature
indicates among the procedural barriers which include the following issues, such as, red tape
and the documentation. This red tape or the bureaucracy can be identified as the obstacle for
exporting, importing tariffs like there is another factor which is identified for stumbling the
block of exporters. There are the non-tariff barriers like the establishment of the various quality
control as well as the safety standards where it occasionally involves the requirement for
adapting the products as per the needs of various foreign markets transportation (Baumgartner

& Rauter, 2017). There are also some distribution difficulties for the foreign markets as well as
the domestic markets as it is found to limit the ability for the exporters. There is the difficulty
for finding the trustworthy if distributor for Nigeria.
Exogenous Barriers
It is finally identified that as per exogenous barriers which are needed to obtain the uncertainty
of the international markets. It is largely due to the activities for the other players within the
market and mainly it is due to the activities for the other players within the market, like the
competitors, supply and demand as well as the foreign governments. It means there are
variable transcend which controls the exporting company. There are the factors, like the
powerful competition as it can be faced the foreign markets which have been cited at this
context. There is the political instability for the foreign markets as well as the risk of losing the
money (Fransen, Verlegh, Kirmani, & Smit, 2015). There is the study which is highlighted by the
dynamic nature for the barriers for exporting. So it has been identified consistently that the
variations within the barrier as it perceptions by the export stage within Nigeria.
Need for internationalization
According to the viewpoint of (Peng, M. W. 2017), as there are a lot of barriers in Nigerian small
and medium scale agribusiness enterprises, it has been planning for internationalization. The
researcher has mentioned some of the barriers like financial barriers, human resource barriers,
and specification of the firm as well as industry (Peng, M. W. 2017). It is evident that if the
country is already rich in agriculture production then Nigerian enterprises will face intense
competition from those SMEs and hence it will become one of the barriers to making entry. In a

country like USA and Canada If Nigerian small and medium agri based enterprises want to make
an entry as FDI then they have to face a problem related to the availability of the cheap human
resource. It is because in the United States of America and in Canada the cost of labour is more
as compared to Nigeria, and other developing countries and nationalities (Ali, 2018). But if
talking about technological advancement and modernization, United States of America, Canada
and France are vibrant markets with tougher competitions. It would be difficult for the Nigerian
small and medium scale agri based enterprises to take a final decision regarding the entry into
United States, Canada and so on. Hence, it can be said that the decision regarding the
internationalization can be taken according to the demanding situation of the particular
enterprises. If the enterprise is enough strong and has sufficient financial resources then it may
plan to go international operation at large (Baumgartner & Rauter, 2017). Whereas if the
enterprise lack the proper financial resources and capabilities then it needs to drop the plan to
make the entry into a developed nation. In this case, it may take the decision to enter into
China, India as in this country it may get access to cheap labour and resources. Which will give
strategic as well as competitive advantages to the particular small and medium scale agri based
enterprises?
For Example if Nigerian small and medium agricultural enterprises want to enter into the USA
as the part of internationalizing their business and setting up operations in that foreign market,
then they need to first look into the matter of availability of labor as in the USA they will not get
cheap labor, but at the same time, the USA will help them with advanced technology and
equipment's. So here firm need to analyze the costs and benefits than taking the final decision
of making entry into the USA market at large.

According to the viewpoint (Ibrahim 2017) Nigerian small and medium scale agribusiness
enterprises may use the location advantage theory while planning to go international. The
location-specific advantage is thus considered as the ability for the individual, company as well
as the economy for conducting better activity related to the location. It is because it will help
them in analyzing the strategic as well as a competitive advantage in an effective manner
(Ibrahim et al., 2017). The research conclusion of the researcher highlights that Location
advantage theory helps the organization is going to international operation successfully.
Additionally, as per the Okpara and Pamela (2012), it has been demonstrated that In case of
SME, there is an enormous contribution for creating the employment in Nigeria (Walsh &
Dodds, 2017). It has been further found that in SME there is 20 to 45 per cent of the full-time
business. Moreover, there is 30 to 50 per cent for the rural household earnings (Brea Solís,‐
Casadesus Masanell, & Grifell Tatjé, 2015). In some cases, the performance for SME will be low‐ ‐
as per the expectation. It would produce the sound in case of improving within the bigger
economy. In South Africa, SMEs are found that 80 percentages of the formal business and other
95 per cent of the overall business division are included. There is 46 per cent for financial
activities including 84 per cent of private labour are included in this sector (Chan & Huff, 2014).
Conceptual framework
The conceptual framework has been set up in the below figure 1 and figures 2 with the specific
components as they impact in case of Nigerian agricultural SMEs for the export performance.
Therefore, there is the conceptual framework hypothesizes that there is the commitment for
the institutional components in order to have the impact over the entrepreneurial orientation

along with the global system capacities for Nigerian Agricultural SMEs as per the export
performance (Dell'Era, Landoni, & Verganti, 2015). There are the internal resources for the
business for having the impact in case of Nigerian agricultural SMEs performance which is the
most respected entrepreneurial orientation for the firm as it is needed to intellectualize for the
innovation, reactiveness along with the risk-taking activities for the company. Therefore, the
institutional environment components would find as the influence for the impact in order to EO
for the export performance. Thereby, it is the conceptual framework which provides the
general structure in case if investigational analysis along with it shows that there are the
diagrammatical estimation connections which are needed to induce for the study question
(Elkington, 2018). Therefore, the hypotheses are found to produce for each kind of research
question. There are the hypotheses which as it can be produced for many kinds of research
questions. It is the study research model which is needed to assess in which way the variables
will be accompanying in order to determine the agricultural sector for the performance of
SME’s (Whyte & Lohmann, 2015).
There may be the internal resources for the SMEs and it is the EO of the organization. Those
resources are as risk-taking, innovative along with proactive.
On the other hand, there are some Institutional environmental factors which are related to the
government, legal along with wider factors (Fransen, Verlegh, Kirmani, & Smit, 2015).
As per the prevailing theory, there is the variable which is found to be probable for affecting the
export performance as it is measured.