Rural Entrepreneurship and Value Creation in Furniture Manufacturing Industry in Tanzania

Abstract

This PhD thesis analyses customer value creation through the entrepreneurial activities of rural micro and small enterprises (MSEs) in the wood furniture manufacturing industry. Tanzanian customers have a stronger preference for imported wood furniture because products of Tanzanian MSEs are low in quality. Rural MSEs need to find new ways to create value to customers if they want to survive and flourish in the business. This research examines the challenges that affect rural MSEs in the creation of value to customers, and the changes required in MSEs for the creation of customer value. The thesis has the following theoretical bases: resource-based theory; institutions theory; bricolage; entrepreneurial orientation and business model. It is a qualitative research which was carried out in the Mvomero district, Tanzania. An action research approach was employed. For that purpose, a purposive sampling technique was used to establish a sample size of 30 rural MSEs and 11 buyers of rural MSEs’ products. Data were obtained through interviews, observations, and discussions. My findings indicate that the challenges that affect MSEs in value creation are; insufficient financial capital, furniture-making machines, manufacturing and management skills, competition, middlemen, supply of raw materials, transport services, access to customers, and government regulations. These factors are not the same for all MSEs because different conditions of basic amenities shift the importance of these different factors. These factors are situated at different levels: enterprise, industry, and institutions. My research points out that it is necessary to tackle the institution-level factor (government regulations) first before considering changes in industry-and MSE-level factors in the course of value creation in rural MSEs. After the identification of the challenges, this research examines the potential ways to respond to value creation challenges. The focus is on two major ways to deal with these challenges: first, the change in business models and, second, the change of the form of entrepreneurship. Both have the potential to respond to value-creation challenges in rural MSEs. Next, this research is focusing the implementation of these two ways of tackling the mentioned challenges. Motivation, leadership, and commitment are three determinants that influence the adaptation of business models and entrepreneurship form. Furthermore, this study classifies four types of rural MSE based on the need to adapt the way of enterprising and the engagement of MSEs in the adaptation. These four types are; prospective MSEs, progressive MSEs, protective MSEs, and perpetuating MSEs. These different categories of MSEs respond differently to the challenges mentioned above and in order to develop the right approach it is important to understand in which category a specific MSE belongs. Prospective MSEs are the most promising ones to implement changes while perpetuating ones have a hard time to change. The other categories take in-between positions. These findings are valuable for strategic initiatives of rural MSEs and their supporting entities (such as non-governmental organisations, donors and government entities including ministry of industry, trade and marketing; ministry of natural resources and tourism; small industries development organisation and local government authorities example community development offices) that are meant to improve the performance in customer value creation in rural areas. This study shows how the adaptation of business logics and entrepreneurship governance can be powerful tools in enhancing value creation to customers in rural MSEs. However, more research is needed to develop a comprehensive framework that can function as a guideline to improve the situation of rural MSEs in developing countries.