Product Differentiation and SME’s Market Participation: Implications For Tanzanian Agro Processing Industry
Keywords:
Product differentiation, market participation, market segment, SMEs.Abstract
This paper examined the likelihood of agro-processing SME’s in Tanzania to participate in a range of markets based on product differentiation strategy. Its motivation is based on lack of adequate knowledge on the benefits of product differentiation and SME’s fear on cost associated with product differentiation, which discourages investment in this area. This is due to the relatively low financial capacity of most agro-processing SMEs in Tanzania. Specifically, the aim was to examine the probability of SME’s market participation based on technological effect, staff skills and firm’s experience effect on product differentiation. The empirical evidence was aided by the application of the ordered probit marginal effects model on primary data collected from 300 respondents drawn by simple random sampling technique. The results reveal less likelihood on SME’s market participation to low traditional market while high likelihood is evident to the middle and high markets. The paper contributes to the existing literature that improved technology, managerial skills and firm’s experience are necessary in improving market participation into higher market levels. The exposition is based on the ordered probit marginal effects econometric method not previously used in existing literature in this area. The findings unveil insights to institute appropriate policies so as to enhance SME’s market participation through revealed benefits on value addition emanating from product differentiation for national economic growth.
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