ISSUES AND CHALLENGES FACED BY

MICRO LEVEL ENTREPRENEURS IN UAE

Dissertation

Submitted in partial fulfilment of the requirement of

BITS G561T Dissertation

BY

Vignesh. S

ID NO. 2014H149013U

Under the supervision of

Dr. Srinivasa Rao

ACADEMIC RESEARCH DIVISION

BIRLA INSTITUTE OF TECHNOLOGY AND

SCIENCE, PILANI

DUBAI CAMPUS, DUBAI, U.A.E.

February 2016 – June 2016

 ACKNOWLEDGEMENT

“It is not possible to prepare a project report without the assistance & encouragement of other
people. This one is certainly no exception.”

On the very outset of this report, I would like to extend my sincere & heartfelt obligation
towards all the personages who have helped me in this endeavour. Without their active
guidance, help, cooperation & encouragement, I would not have made headway in the
dissertation.

I am extremely thankful to my faculty guide Dr Srinivasa Rao, BITS Pilani (Dubai

Campus) for his valuable guidance and support for this project in its presently.

I extend my gratitude to Management of BITS Pilani for giving me this opportunity.

I also acknowledge with a deep sense of reverence, my gratitude towards my parents

and member of my family, who has always supported me morally as well as
economically.

At last but not least gratitude goes to all of my friends and colleagues who directly or
indirectly helped me to complete this project report.

Any omission in this brief acknowledgement does not mean lack of gratitude.

Thanking You

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 CERTIFICATE

This is to certify that the Dissertation entitled Issues and Challenges faced by Micro level
Entrepreneurs in UAE and submitted by Vignesh. S ID No. 2014H149013U in partial
fulfillment of the requirement of BITS G561T Dissertation for the degree Master of Business
Administration embodies the work done by him/her under my supervision.

Signature of the Supervisor

Date:

Dr. Srinivasa Rao

Associate Professor, Management

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 DISSERTATION ABSTRACT

According to various reports from the economic departments of UAE, around 94% of 300,000
enterprises in the UAE are micro, small & medium enterprises (MSMEs). The micro, small and
medium level enterprises in UAE are primarily comprised in the trading, service and
manufacturing sector. These SMEs contribute to around 90% of employment in the country. My
research is primarily focused on Micro SMEs which contributes to 72% of the existing SMEs in
the country. My study will also be limited to the emirates of Dubai, Abu Dhabi and Sharjah as
they comprise of 93% of the country’s total SMEs. The classification of micro level enterprises
is different for Dubai, Abu Dhabi and Sharjah based on the number of employees, turnover and
capital. For Dubai, the classification varies for trading, service and manufacturing sectors.

Due to the important contribution of micro level enterprises to the economy and GDP of UAE, it
is inevitable to identify the various kinds of issues and challenges that these enterprises face in
their different phases. It is a primary aim for the organization to understand these challenges and
devise a relevant strategy to solve the problems that arise due to these challenges.

The main focus of this Dissertation is on the various issues and challenges faced by the Micro
level entrepreneurs in UAE. The key critical external and internal challenges will be identified
by designing a questionnaire. Data collection will be done from the micro level entrepreneurs in
the sample through surveys. In addition, the challenges which arise due to cultural and
demographic factors will also be assessed in this research. Suggestions and recommendations
given by entrepreneurs to tackle these challenges will also be included as a part of this study.

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 LIST OF ABBREVIATIONS

UAE – United Arab Emirates

AED – United Arab Emirates Dirham

SME – Small and Medium Enterprises

DED – Department of Economic Development

GDP – Gross Domestic Product

USD – United States Dollar

FDI – Foreign Direct Investment

SCCI – Sharjah Chamber of Commerce and Industry

LIST OF TABLES
Table 1: SME Definition in Dubai 18

Table 2: SME Definition in Abu Dhabi 18

Table 3: SME Definition in Sharjah 19

Table 4: Types of Ratings 30

Table 5: Respondents and Responses 32

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 LIST OF FIGURES

Figure 1: Structure of Study 4

Figure 2: Breakdown of SMEs by Emirates 17

Figure 3: Key Business Challenges in Dubai,Q1 2014 21

Figure 4: Key Business Challenges in Sharjah, Q1 2014 21

Figure 5: Background data 33
Figure 6: Educational Background 33

Figure 7: Education and entrepreneurship 34

Figure 8: Previous Experience 34

Figure 9: Financing Type 35

Figure 10: Debt Financing Type 35

Figure 11: Obtaining finance 36

Figure 12: Dedicated Finance Personnel 36

Figure 13: Absence of finance personnel 37

Figure 14: Delayed amount receivables 37

Figure 15: Credit limit and time 38

Figure 16: Government Fees 39

Figure 17: Government Permissions 39

Figure 18: Government Regulations 40

Figure 19: Competitive Strategy 40

Figure 20: Presence of Strategy 41

Figure 21: Competitors 42

Figure 22: Competitor knowledge 42

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Figure 23: Marketing challenges 43

Figure 24: Marketing techniques 44

Figure 25: Dedicated marketing personnel 45

Figure 26: Absence of marketing personnel 45

Figure 27: Cost of Operation 46

Figure 28: Reduced demand 47

Figure 29: Networking events 47

Figure 30: Absence of networking 48

Figure 31: Adaptability of people 48

Figure 32: Multitasking 49

Figure 33: Teamwork 49

Figure 34: Goal definition 50

Figure 35: Employee opinions 50

Figure 36: Performance feedback 51

Figure 37: Religious beliefs 51

Figure 38: Concessions for religious commitments 52

Figure 39: Business during Ramadan 52

Figure 40: Religion in recruitment 53

Figure 41: Nationality in recruitment 53

Figure 42: Admin recruitment 54

Figure 43: Recruitment strategy 54

Figure 44: Hiring of interns 55

Figure 45: Advantage of interns 55

Figure 46: Disadvantage of interns 56

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Figure 47: Period of internship 57

Figure 48: Internship strategy 57

Figure 49: Employee management 58

Figure 50: Rating of challenges 59

Figure 51: Major challenges 61

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TABLE OF CONTENTS

Cover Page ...................................................................................... i

Acknowledgement ........................................................................... ii

Certificate ........................................................................................ iii

Abstract ............................................................................................ iv

1 Introduction................................................................. 1
1.1 Background ............................................................ 2

1.2 Objective of the study ............................................ 2

1.3 Significance of the study ........................................ 2

1.4 Scope of the study ................................................... .3

1.5 Limitations of the study……………………………4

1.6 Structure of the study……………………………...4

2 Literature Review......................................................... .5

2.1 Entrepreneurship Concepts ..................................... 6

2.1.1 Entrepreneurship Definition………………....6

2.1.2 Entrepreneurial Process………………………7
2.1.3 Key Entrepreneurial Success Factors………..8
2.1.4 10 deadly mistakes of Entrepreneurship & how to
avoid them…………………………………………...12
2.2 Economic Background of UAE ............................... .14

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 2.2.1 Economic Background of Abu Dhabi………...14
2.2.2 Economic Background of Dubai……………...15
2.2.3 Economic Background of Sharjah……………16
2.3 Definition of SME Enterprises in UAE .................. .17

2.3.1 Definition of SMEs in Dubai………………….18

2.3.2 Definition of SMEs in Abu Dhabi…………….18
2.3.3 Definition of SMEs in Sharjah………………..19
2.3.4 Economic Departments & Business Surveys...19
2.4 Key Business Challenges in Dubai & Sharjah........ .20

2.5 Cultural and Demographic Factors………………...22

2.5.1 Cultural Factors………………………………..22

2.5.2 Demographic Factors…………………………..22
3 Survey Methodology ..................................................... .23
3.1 Data Collection Methods…………………………….24

3.2 Sampling…………………………………...…………25

3.2.1 Sampling type……………………………..……25

3.2.2 Sample size……………………………………...26
3.2.3 Sample characteristics…………………………26
4 Questionnaire Design ................................................... ..27
4.1 Questionnaire Components…………...…………….28

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 4.2 Challenges Assessed in Questionnaire…………...…29

4.3 Types of Questions & Ratings……………………....30

5 Data Analysis ................................................................... 31

5.1 Outline of Responses .................................................... 32

5.2 Analysis ......................................................................... 33

5.3 Rating of Challenges..................................................... 58

6 Result ................................................................................ 60
6.1 Result Depicting Major Challenges............................. 61

6.2 Suggestions and Recommendations ............................. 65

7 Conclusion ...........................................................................66
8 References and Bibliography ............................................. 67

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INTRODUCTION

1
1. INTRODUCTION

1.1 Background

United Arab Emirates is the fifth biggest oil exporter on the planet. However differentiated
economy and non-oil part contributes more than 60% of GDP. These non-oil divisions include
trading, manufacturing and service sectors. Among these non-oil segments, around 72% of the
endeavours are micro level. Increased number of micro level ventures in UAE conveys the
requirement for us to comprehend them intently alongside their issues and challenges.
Numerous studies and surveys have been conducted on SME's in general however this study
focuses on the issues and challenges confronted by the micro level enterprises in UAE.

1.2 Objectives of the Study

The main objective of this study is to identify, understand and analyze various issues and
challenges faced by the micro level entrepreneurs in UAE. The key critical internal and
external issues and challenges are to be identified. In addition, to provide suggestions and
recommendations on some solutions to the key challenges faced by them.

1.3 Significance of the Study

UAE has the most diversified economy in the GCC. This results in more competition within the
micro level enterprise sector and companies always try to manage their growth and look for new
paths to maximize profits. But this is only possible if the various issues and challenges posed to
them are tackled. Some issues and challenges that are faced by entrepreneurs can be categorized
as cost of finance, product/service demand, technology innovations, etc.

Several studies by the DED, SCCI & Khalifa Fund have described some of the challenges faced
by the enterprises in Dubai, Abu Dhabi and Sharjah. However majority of these studies have
only focused on the challenges of large enterprises and SMEs. Though micro level entrepreneurs
may be assumed to be a type of SME but no specific studies have been conducted exclusively
for micro level sector challenges. The micro level enterprises which comprise almost 72% of
SME population in the UAE play a crucial role in contributing the country’s economy.

2
1.4 Scope of Study

o Define the Micro level entrepreneurial sector in United Arab Emirates.

o Identify and analyze the key factors that affect the performance of Micro
level enterprises.

o Identify and analyze the factors that are associated with the failure of micro level
enterprises.

o Analyze the challenges is various departments and processes of the enterprise.

o Study how cultural and demographic factors affect the running of micro level
enterprises.

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1.5 Limitations of the Study

o To the micro level enterprises in UAE (particularly Dubai, Abu Dhabi and
Sharjah) only.

o The findings are limited to implying the key & most recurring challenges faced by
the enterprises.

1.6 Structure of the study

Questionaire
Literature Development Data
Conclusion
Review and Survey Analysis
Distribution

Figure 1: Structure of study

4
LITERATURE REVIEW

5
2. LITERATURE REVIEW

Entrepreneurship is a key driver of any economy. Wealth and a high greater part of employments
are made by small organizations began by entrepreneurially minded people, a large portion of
whom go ahead to make huge organizations. People exposed to entrepreneurship regularly
express that they have more chance to practice innovative opportunities, higher self-regard, and a
general more noteworthy feeling of control over their own lives. Therefore, numerous
accomplished representatives political pioneers, financial analysts, and teachers trust that
encouraging a hearty entrepreneurial society will augment individual and aggregate monetary
and social accomplishment on a nearby, national, and worldwide scale.

2.1 Entrepreneurship Concepts

2.1.1 Entrepreneurship Definition

Entrepreneurship is the process of creating something new with value by devoting the necessary
time and effort; assuming the accompanying financial, psychic and social risks and uncertainties;
and receiving the resulting rewards of monetary and personal satisfaction [1].

Above all else, enterprise includes the creation procedure – making something new of worth. The
creation needs to have quality to be business visionary and worth to the crowd for which it is
produced. Also, business enterprise requires the commitment of the vital time and exertion. Only
those experiencing the entrepreneurial procedure appreciate the critical measure of time and
exertion it takes to make something new and make it operational. Expecting the vital dangers and
vulnerabilities is the third part of enterprise. Since moves make place after some time, what's to
come is obscure and activity is intrinsically sure. This vulnerability is further enhanced by the
novelty intrinsic to entrepreneurial action, such as the creation of new products, new services,
and new ventures. Therefore, entrepreneurs respond to, and create, change through their
entrepreneurial actions, where entrepreneurial action refers to behaviour in response to a
judgmental decision under uncertainty about a possible opportunity for profit. The final part of
the definition involves the rewards of being an entrepreneur. The most important of these

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rewards is independence, followed by personal satisfaction, but monetary reward also comes into
play. For some entrepreneurs, money becomes the indicator of the degree of success achieved.

2.1.2 Entrepreneurial Process

The entrepreneurial process has four distinct phases [1]:

I. Identification and evaluation of the opportunity;

II. Development of the Business Plan;
III. Determination of the required resources; and
IV. Management of the resulting enterprise.

1. Identification and evaluation of the opportunity :

• Opportunity assessment;
• Creation and length of opportunity;
• Real and perceived value of opportunity;

• Risks and returns of opportunity;

• Opportunity vs. personal skills and goals;

• Competitive environment
2. Develop Business Plan :

• Title Page;
• Table of contents;

• Executive summary;
• Major section :
 Description of business;

 Description of industry;
 Technology Plan;
 Marketing plan;

 Financial plan;

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  Production plan;

 Organization plan;

 Operational plan;

 Summary;

• Appendixes (Exhibits)

3. Resources Required :

• Determine resources needed;

• Determine existing resources;

• Identify resource gaps and available suppliers

• Develop access to needed resources.

4. Manage the Enterprise :

• Develop Management style;

• Understand key variables for success;

• Identify problems and potential problems;

• Implement control systems;

• Develop growth strategy

2.1.3 Key Entrepreneurial Success Factors

The most critical and most important factors that can make an entrepreneur to become a
successful entrepreneur are [3]:

a. Willingness to take an action:

This is the first and most essential variable for would be and current entrepreneurs. All
different variables introduced underneath, is not vital on the off chance that you are an
individual who is reluctant to make a genuine move. Actions are something that leads
entrepreneurs to the achievement. Without them, they can't hope to be fruitful entrepreneurs.

8
b. Entrepreneurial knowledge:

Business people are persons who must have unrivalled learning about particular business
issues for business that they begin. The learning will build their business potential vitality
and in substantial part will contribute in the success of the organization.

c. Entrepreneurial creativity:

You should be a creative individual on the off chance that you need to be sufficiently unique
and with the force of constant changes in your business. The inventiveness will expand your
business potential vitality that will bring numerous conceivable outcomes for your
organization.

d. Entrepreneurial skills:

Each entrepreneur and every business will require diverse entrepreneurial abilities that
sometimes can be vital for the accomplishment of their organizations. In the event that you
have information, however you don't have abilities that can be gotten just through usage of
what you have realized you can't expect that you are near the achievement.

e. Entrepreneurial intelligence:

You should be intelligent to deal with every single conceivable circumstance and tackle the
most difficult issues that will be a constant in your business life. Your knowledge will
furthermore convey uniqueness to your organization since it is something that can't be
replicated from others.

f. Money Management:

Money is the thing that keeps a business afloat. It is a vital piece of purchasing inventory,
paying workers, promoting the business, purchasing or repairing business tools and paying
his own salaries, as indicated by a 2009 article in "Business person" magazine. A fruitful
business person knows how to deal with his cash. From the earliest starting point, it takes
devotion and poise not to settle on a wrong monetary choice or rashly spend organization

9
money, particularly in a lone endeavour. Also, he knows when to contract help, when he can
manage the cost of an office space and pays his bills on time – all while running his
company.

g. Persistence:

Persistence is basically a refusal to surrender from something, or capacity to keep your

activities against your own sentiments that you're not prepared for these actions. Emotions
and inspiration didn't create results, yet the action is something that will deliver it. In this
way, evacuate your sentiments that pulled you back, and with the entire force proceed on
your journey.

h. Ability for teamwork:

Nobody can achieve anything alone so, this is also true for an entrepreneur because he is not
a “superman”. As an entrepreneur, you must be team player for your own and your business
success.

i. Risk taking, but calculated risk:

This is genuinely a standout among the most imperative inquiries: Do entrepreneurs take
enough risk? Yes, every business start-up is in some level unsafe. In any case, more vital is
how an effective business person goes out on a limb? The word 'calculated risk' is the most
proper word for these attributes.

j. Having self-confidence:

Self-confidence is a really important and key success factor for entrepreneurs. The basic
thought is that nobody will become an entrepreneur if he doesn’t have self-confidence in
himself, especially related to start and manage his own business.

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k. Having enough experience:

Sometimes experience is in category not so required as a factor, but it is something that will
increase business potential energy. You as an entrepreneur must employ all present and
previous experience you have into the business that you are building.

l. Honesty:

Genuineness is essential for each situation; however some of the time trustworthiness, being
genuine can be the greatest adversary of a business visionary in some intricate conditions.

m. Connections:

More connections mean more possibilities for building a successful business.

n. Planning:

Starting a business on your own, let alone with someone else, requires lots of planning.
However, the temptation often is to jump straight into the venture with minimal planning.
The "figure it out along the way" mentality is not one of many successful entrepreneurs.
Planning is essential to starting and running a successful business. From the early stages--
market research and business plan writing--to later stages--hiring, firing and sustaining--a
successful entrepreneur must think ahead, analyze every single business decision and
constantly compile data. Another aspect of planning is setting goals, outlining how to achieve
them and achieving them. Short-term and long-term goals help motivate and remind
entrepreneurs of their passions and aspirations, according to "Entrepreneur".

o. Adaptation:

Adaptation is crucial in a business person's prosperity. This fundamental variable comes in a

few diverse structures and is key to the starting and life of a new enterprise. Business
visionaries must figure out how to adapt amid the business arranging stages. All through the
procedure, things change and a business visionary must have the capacity to adjust a thought
or plan to fit the circumstances. Another type of this variable is adjusting mechanically to

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 your industry. With the significant accentuation on innovation in all real commercial
ventures, in the event that you can't keep up, you can't succeed. Business people should
always look into industry principles so they can stay aware of contenders.

2.1.4 10 deadly mistakes of Entrepreneurship and how to avoid them

a. Management mistakes:

In most small businesses, poor management is the primary cause of business failure.
Sometimes, the manager of a small business does not have the capacity to operate it
successfully. The owner lacks the leadership ability, sound judgment, and knowledge
necessary to make the business work.

b. Lack of experience:

Small business managers need to have experience in the field they want to enter. For
example, if an entrepreneur wants to open retail clothing business, he or she should first work
in a retail clothing store. This will provide practical experience as well as knowledge about
the nature of the business.

c. Poor financial control:

Sound management is the key to a small company’s success, and effective managers realize
that any successful business venture requires proper financial control. Business success also
requires having a sufficient amount of capital on hand at start-up. Most entrepreneurs
believe that profit is what matters most in a new venture, but cash is the most important
financial resource a company owns.

d. Weak marketing efforts:

Sometimes entrepreneurs make the classic “Field of Dreams mistake.” Building a growing
base of customers require a sustained, creative marketing effort. Keeping them coming back
requires providing them with value, quality, convenience, service, and fun – and doing it all
quickly.

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e. Failure to develop a Strategic Plan:

Too many small business managers neglect the process of strategic planning because they
think that it is something that benefits only large companies. Failure to plan, however,
usually results in failure to survive. Without a clearly defined strategy, a business has no
sustainable basis for creating and maintaining a competitive edge in the marketplace.

f. Uncontrolled growth:

Growth is a natural, healthy, and desirable part of any business enterprise, but it must be
planned and controlled. Management expert Peter Drucker says that start-up companies can
expect to outgrow their capital bases each time sales increase 40 to 50 percent. As the
business increases in size and complexity, problems increase in magnitude, and the
entrepreneur must learn to deal with them.

g. Improper inventory control:

Normally, the largest investment a small business owner makes is in inventory, yet inventory
control is one of the most neglected managerial responsibilities. Insufficient inventory levels
result in shortages and stock outs, causing customers to become disillusioned and leave.

h. Poor location:

For any business choosing the right location is partly an art and partly a science. Too often,
business locations are selected without proper study, investigation and planning. Especially
for retailers, the lifeblood of the business – sales – is influenced heavily by choice of
location.

i. Incorrect pricing :

Establishing prices that will generate the necessary profits means that business owners must
understand how much it costs to make, market, and deliver their products and services. The
first step in establishing accurate price is to know what a product or service costs to make or
to provide. Then, business owners can establish prices that reflect the image they want to
create for their companies, always, of course, with an eye on the competition.

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 j. Inability to make the “Entrepreneurial transition”:

Making it over the “entrepreneurial start-up hump” is no guarantee of business success.

After the start-up, growth usually requires a radically different style of management, one that
entrepreneurs are not necessarily good at. Growth requires entrepreneurs to delegate
authority and to relinquish hands-on control of daily operations, something many
entrepreneurs simply cannot do.

2.2 Economic Background of UAE

Before going deep into the study of issues & challenges of entrepreneurs in UAE, it is advisable
to have a brief idea about the economic history of UAE, specifically the 3 main emirates for
SMEs, namely Abu Dhabi, Dubai and Sharjah.

2.2.1 Economic Background of Abu Dhabi

The UAE's rich history is established in exchange and fixing to Islam, which went to the district
in AD 630. While Europeans looked for control of the coasts, inland, the predecessors of the
Bedouin made the sandy deserts of Abu Dhabi and Dubai their home. The town of Abu Dhabi
turned into a vital focus. In the nineteenth century, the British consented to a progression of
arrangements with the individual emirates that brought about the region getting to be known as
"The Trucial States." They concurred not to have dealings with any region aside from the United
Kingdom and not to go into associations with some other outside government without the UK's
assent. Consequently, the British guaranteed to shield the coast from all hostility via ocean and to
help if there should be an occurrence of area assault [4].

The pearling business flourished in nineteenth and mid twentieth hundreds of years, giving wage
and vocation to the general population of the Gulf. Numerous occupants were semi-migrant,
pearling in the mid-year and tending date gardens in the winter. In any case, the monetary gloom
in the late 1920s and mid-1930s, combined with the Japanese development of the refined pearl,
hopelessly harmed the business. In the mid-1930s the principal oil organization groups directed
topographical studies. In 1962, the primary payload of rough was sent out from Abu Dhabi. With

14
oil incomes developing year by year, His Highness (H.H.) Sheik Zayed canister Sultan Al
Nahyan was picked as Ruler of Abu Dhabi in 1966. He attempted a huge system of development
of schools, lodging, doctor's facilities and streets. One of Sheik Zayed's initial strides was to
build commitments to the Trucial States Development Fund. Abu Dhabi soon turned into its
biggest benefactor.

The economy of Abu Dhabi is to a great extent based upon the income produced from common
assets. Petroleum and regular gas assume an indispensable part, albeit some different segments
are likewise developing with a specific end goal to bolster the city's economy because of the
worldwide deterioration of fossil powers. Abu Dhabi is still in a solid financial position as it has
not acquired any immediate obligation in over 10 years. The emirate keeps on being the most
astounding donor to the UAE'S complete GDP and carries on giving liberal money related dies
down to the littler emirates in the nation [4].

2.2.2 Economic Background of Dubai

Dubai is one of seven emirates that make up the alliance of the United Arab Emirates (UAE). In
1833, 800 individuals from the Bani Yas tribe drove by the Maktoum family settled at the mouth
of Dubai rivulet. This lovely common harbor empowered Dubai to quickly turn into a fruitful
community for angling, pearling and exchanging.

Toward the begin of the twentieth century, Dubai was a flourishing ocean port. The business
sector on the eastern bank of the brook was the biggest of its kind on the coast, with 350 shops
and a consistent stream of guests and representatives. By the 1930s, Dubai's populace had
developed to about 20,000 – 1/4 of which were exiles [5].

In the 1950s the river started to sediment because of the quantity of boats that thought that it was
indispensable for their exchange. In a yearning yet profoundly insightful vision, the late Ruler of
Dubai, His Highness Sheik Rashid container Saeed Al Maktoum, chose to have the conduit dug.
This brought about a sensational increment in the volume of load entering and leaving Dubai. At
last it built up Dubai's future as the Middle East's real exchanging and re-selling center point.

At the point when oil was found in 1966, Sheik Rashid utilized the income to quickly create base
including schools, healing facilities, streets, present day information transfers systems and

15
transport frameworks. A runway augmentation that could oblige any kind of airplane saw Dubai
International Airport start its trip to getting to be one of the busiest in history and the biggest
man-made harbour on the planet was built at Jebel Ali which incorporates a business free zone
for outside financial specialists.

Dubai's recipe for advancement was getting to be apparent to everybody – visionary

administration, superb base, an exile amicable environment, zero duty on individual and
corporate pay and low import obligations. Therefore, Dubai rapidly turned into a business and
tourism center point for all locales. In the 1980s and mid-1990s, Dubai took a vital choice to
wind up a main universal tourism destination. It is currently known all through the world for its
lavish lodgings, wonderful engineering, world-class excitement and brandishing occasions.

Such a transient ascent has prompted the city being positioned as the top remote direct venture
destination by the FDI magazine of the Financial Times. As per FDI Intelligence, in 2011 while
numerous economies were grappling with the outcome of the worldwide money related
emergency, Dubai pulled in abroad venture for a sum of 273 undertakings worth USD 6.3
billion, making more than 15,260 new employments all the while [5].

2.2.3 Economic Background of Sharjah

The past history of 5000 years demonstrates that Sharjah has stayed as one of the wealthiest
towns in the Gulf locale. At the point when the number of inhabitants in Sharjah was low, the
wage sources were predominantly through the financial exercises, for example, chasing,
exchanging, cultivating, angling and ring cultivating. In the 17the century, as Europeans favored
the ranges of the Gulf and Red ocean as main courses of correspondence between the
Mediterranean district and India, Sharjah began to thrive with the assistance of waterfront
exchanging and pearling. In the nineteenth century, the city turned into a phase for the exercises
amongst Europe and Asia [6]. On the second December, 1971, Sharjah turned out to be a piece of
United Arab Emirates as an organizer part and in 1972, His Highness Dr. Sultan canister
Mohammed Al Qasimi turned into the leader of Sharjah. Around the same time, oil was found in
the Mubarak oilfield arranged 80 kms seaward and near the Abu Mousa Island. The creation of
oil started two years after the fact furthermore gas boring was begun in 1990. Since the

16
revelation of oil, Sharjah city has massively created by using the accessibility of common riches
and the shrewdness gave by the Sharjah ruler H.H. Sheik Sultan canister Mohammed Al Qasimi.

The administration of Sharjah has perceived the significance of private parts as an establishment
of a solid economy. It has been giving essential base offices and astounding administrations to
welcome remote interest in different parts like assembling, exchange and administrations. Right
now, Sharjah has exchange relations with 126 nations and it is additionally assuming a key part
in the worldwide speculation situation. The city has built up a decent stage for a monetary
development. The city powers dependably watch out for essential variables like the usage and
enhancements to the street foundation, the redevelopment and development of Sharjah
International Airport and the updating of force and water offices. Furthermore, particular modern
zones are set up in the west of the city and they are all around connected with the ocean ports and
airplane terminals of Sharjah [6].

2.3 Definition of SME Enterprises in UAE

As discussed earlier, SMEs are considered as the engines for economic growth and a vital
contributor to the economy’s GDP. As shown in the pie chart, since the majority of SMEs in
UAE are established in Dubai (45%), Abu Dhabi (32%) and Sharjah (16%), we will be focusing
only on these three Emirates for our study [7].

Figure 2: Breakdown of SMEs by Emirates

17
2.3.1 Definition of SMEs in Dubai

The basis of classification is employee turnover and Number of employees. SME’s are the back
bone of the economy in Dubai as they count for 95% of enterprising firms in Dubai. As shown in
the below classification, the micro level companies are those with less than/equal to 9 employees
and less than/equal to AED 9 million Turnover in Trading sector, with less than or equal to 20
employees and less than or equal to AED 10 million Turnover in Manufacturing sector and with
less than or equal to 20 employees and less than or equal to AED 3 million Turnover in Service
sector [7].

Table 1: SME Definition in Dubai

2.3.2 Definition of SMEs in Abu Dhabi

The basis of classification is Number of employees. As shown in the below classification, the
micro level companies are those with less than 5 employees [7].

Number of workers

Micro <5

Small > 5 and ≤ 19

Medium > 20 and ≤ 49

Large > 50

Table 2: SME Definition in Abu Dhabi

18
2.3.3. Definition of SMEs in Sharjah

The basis of classification is Number of employees and Capital. As shown in the below
classification, the micro level companies are those with greater than 3 employees and greater
than AED 200,000 Capital [10].

Table 3: SME Definition in Sharjah

2.3.4. Economic Departments and Business Surveys

Before going deep into the research methodology, it is important to consider similar
surveys which have been conducted in UAE. Some of the most important surveys were the ones
conducted by the DED (Department of Economic Development) and SCCI (Sharjah Chamber of
Commerce & Industry). With the aim of regulating, organizing and enhancing industry and trade
within the respective emirates, these departments were established.

The Department of Economic Development (DED) is a Dubai Government Department that has
the mandate to help achieve the key strategic objectives of fostering ‘Sustainable Economic
Development’ and strengthening the ‘Competitiveness of Dubai’. The Economic Studies &
Policies Division under DED conducts the Quarterly Business Surveys, in coordination with
DED Agencies and in collaboration with Dun & Bradstreet South Asia Middle East Ltd with the
main aim of providing a timely assessment of business performance and expectations.

Sharjah Chamber of Commerce & Industry (SCCI) was established by an Amiri decree issued in
1970 by His Highness the Ruler of Sharjah in order to effectively and vitally participate in the
organization of economic life and the prosperity of its trade, industry and professions sectors on

19
all levels and in cooperation with the concerned establishments and bodies and local departments
[11]
.

The Quarterly Business survey gives various information such as Business Confidence Index,
SME Outlook & Performance for the Quarter, Investment Outlook, Exporter’s Outlook and Key
Business Challenges. We will be focusing primarily on the key business challenges survey.

2.4. Key Business Challenges in Dubai and Sharjah

Let us understand the various SME business challenges existing in Dubai and Sharjah as
identified by DED and SCCI respectively. Key business challenges are identified by these
departments at each quarter of every year. In all quarters, the challenges are almost the same
except that they may change their position at the each quarter depending on their impact &
influence on the enterprises at each quarter.

 Cost of Rental & Leasing

 Competition
 Cost of raw materials
 Government Regulations
 Government fees
 Demand for products / services
 Cost of operations
 Cost of labour
 Cost of finance
 Availability of skilled labour
 Availability of finance

20
 The major critical challenges faced by entrepreneurs in Dubai during the Quarter
[12]
Q1 of 2014 are given in the below chart :

Figure 3: Key Business Challenges in Dubai,Q1 2014

The major critical challenges faced by entrepreneurs in Sharjah during the Quarter Q1 of
[11]
2014 are given in the below chart :

Figure 4: Key Business Challenges in Sharjah, Q1 2014

21
 2.5 Cultural and Demographic factors

2.5.1 Cultural factors

In addition to the above mentioned factors, we will be looking into the potential challenges
that could arise as a result of the organizational culture existing within the enterprise. In order
to assess the organizational culture within the company, cultural profiles have been devised.
Cultural assessment profiles can be classified into :-

 Clan – Concentrates on internal maintenance, flexible, concern for people, teamwork.

 Adhocracy – Concentrates on external positioning, high flexibility & adaptability, offer
new products & services.
 Hierarchy – Focuses on internal maintenance, stability, control, administrative, fixed
rules & regulations.
 Market – Focuses on external maintenance, stability, control, goal achievement. People
are hard-driven, tough, and competitive & productivity is the main principle.

2.5.2 Demographic factors

Demographic factors include factors related to nationality, religion, ethnicity, gender, etc. In
UAE, Islam is the official religion. Freedom of religion exists in the country. Religious
discrimination is a punishable offence. People found guilty will be jailed & deported.
Approximately 55% are Muslims, 25% Hindu, 10% Christian, 5% Buddhist and the
remaining 5% to others (Parsi, Sikh, etc). Hence there is a demographic & religious mix in
almost all the SMEs in the UAE. UAE observes the holy month of Ramadan. Business and
working hours are reduced to 5-6 working hours a day for Muslims and 6-7 hours for non-
Muslims. As far as gender is concerned, it is found that UAE comprised of 70% men and
30% women population in 2015, according to a survey by GCC research, Business Monitor,
World bank, UN. Questions related to demographic challenges are discussed in the survey
questionnaire.

22
SURVEY METHODOLOGY

23
3. SURVEY METHODOLOGY

3.1 Data Collection Methods

a. Observation:

Observation can be a good way of examining jobs that consist mainly of observable
physical activity.

b. Work sampling:

A variation of the observation technique is the work sampling approach. The job analyst
periodically samples employees’ activities and behaviour on jobs that have long cycles, that have
irregular patterns of activity, or that require a variety of different tasks.

c. Critical incidents:

Another variation of the observation technique, known as critical incidents, examines

only those job activities leading to successful or unsuccessful performance. This approach is
similar to the trait approach used to identify effective and ineffective leaders. An outside
consultant, an immediate supervisor, or a job incumbent conducts this technique. Direct
observation and the two variations thereof are frequently used in conjunction with interviewing.

d. Interviews:

Interviewing the entrepreneur allows that person to describe important activities of the
job that might not be revealed through direct observation.

e. Questionnaires:

Questionnaires have at least two advantages. First, they can pool the responses of numerous
job incumbents and compare job activities across many jobs, using a standard set of common

24
 dimensions. Second, questionnaire can generate much information quickly and
inexpensively.

As far as surveys on SMEs are concerned, the best and most efficient results have been obtained
through questionnaires. Due to high success rate of this tool in getting the primary information,
this tool will be used in this survey with the entrepreneurs of micro level business enterprises [12].

3.2 Sampling

In survey methodology, sampling refers to selecting a subgroup of the elements of the

population selected for participation of the study. Population is the aggregate of all the
elements, sharing some common set of characteristics that comprise the universe for the
purpose of the research problem [12].

3.2.1 Sampling Type

Sampling techniques may be broadly classified into [12]:

 Deliberate sampling
 Simple random sampling
 Systematic sampling
 Stratified sampling
 Cluster sampling
 Area sampling
 Quota sampling

In our study, we are using deliberate or convenience type of sampling technique due to
convenience and existing contacts.

25
3.2.2 Sample size

In our study, a sample of minimum 20 companies is taken from the population of micro level
enterprises in UAE. This sample includes companies from the emirates of Dubai, Abu Dhabi and
Sharjah.

3.2.3 Sample Characteristics

The main characteristics of the sample include:

 Micro level service, trading or manufacturing firms in Abu Dhabi, Dubai or Sharjah
registered or approved by the Abu Dhabi Economic Development, Dubai Economic
Development or Sharjah Economic Development respectively.

 The micro level firms with an age of minimum 1 year.

 Micro level firms with the specified number of employees, turnover or capital as
mentioned earlier in the study for the three emirates.

26
QUESTIONNAIRE DESIGN

27
4. QUESTIONNAIRE DESIGN

As discussed earlier in the research methodology section, questionnaire is the survey instrument
used in this research. The required data is collected from the entrepreneurs in the sample through
personal interviews and mailing online questionnaire. Discussed below are the various
components of the questionnaire.

4.1 Questionnaire Components

The components of the questionnaire help understand the questionnaire and the various sections
that it comprises of. The components are:

a. Introduction:

It is a brief introduction of the study which includes specifying the reason for the survey,
thanking the respondent for his participation and the confidentiality of personal information
and the instructions for answering the questionnaire. The introduction is given in the
introductory mail in the case of online questionnaire.

b. Questions:

The questions of the survey are involved in this component. In the questionnaire there are 67
questions. It is divided into 2 sections: Background Information & Content Questions.
Background information comprises of 13 questions. Content questions consists of questions
of which 43 questions are Challenge assessment questions, 9 questions for rating the
challenges, 1 question for enquiry of any other new challenges and 1 question for getting
recommendations or suggestions from the entrepreneurs.

c. Personal Identification data:

Personal information such as names, contact numbers, email IDs, addresses, etc. of the
respondents are included in this component. As mentioned earlier in the introduction, these
information are kept confidential and will not be disclosed under any circumstances.

28
d. Classification data:

This data includes the characteristics of the participants which helps match their
characteristics with that of the requirements of our sample. It can include information like no.
of employees, location, etc.

4.2 Challenges assessed in Questionnaire

According to the various surveys & components seen in the literature review, the challenges
that are assessed in the questionnaire are:

a) Finance

b) Government Fees and Regulations

c) Competition

d) Marketing

e) Cost of Operation

f) Networking

g) Cultural challenges

h) Demographic challenges

i) Employee recruitment & management

29
4.3 Types of Questions & Ratings

The types of questions used in the questionnaire are open ended type questions, yes/no type
questions, 5 point scale rating type questions and multiple choice type questions. Majority of
the multiple choice questions in the survey are based on the rating values given below:

Entrepreneur Response Rating value for response

Strongly Agree 5

Agree 4

Neither Agree nor Disagree 3

Disagree 2

Strongly Disagree 1

Table 4: Types of Ratings

These questions and their respective rating values are used to determine the main challenges
that are faced by the respondent entrepreneurs. Analysis of the responses from the
entrepreneurs in regards to the challenges will be seen in data analysis.

30
DATA ANALYSIS

31
5. DATA ANALYSIS

5.1 Outline of Responses

Based on the characteristics and size of the sample mentioned in the survey methodology, the
final survey questionnaire was used on the sample population of 21 micro level enterprises in
UAE. Out of these companies in the sample, 11 companies are situated in Dubai, 5 companies in
Abu Dhabi and 6 companies in Sharjah. The organizations from which the responses were
gathered are specified underneath:

Respondent Companies Number of Responses

 Trading 3

 IT Services 8

 Manufacturing 2

 Management Consultancy services 2

 Hospitality Consultancy services 2

 Advertising Services 1

 Aviation Services 1

 Export 1

 Environmental Services 1

Total 21

Table 5: Respondents and Responses

32
5.2 Analysis

I. Background data

 76.2% of the respondents say that it is their first enterprise

Figure 5: Background data

 85.7% of respondent entrepreneurs have tertiary education and 9.5% have secondary
education

Figure 6: Educational background

33
 71.5% of respondents feel that education is important for being an entrepreneur in UAE
whereas 9.5% of respondents disagree with the statement that education is important for
doing business

Figure 7: Education and entrepreneurship

 38.1% of respondent entrepreneurs have worked in a company before in a similar field,

whereas 38.1% of respondents are completely new to the field & are venturing for the
first time. 23.8% had a business before in the field

Figure 8: Previous experience

34
II. Finance

 Due to the trouble in getting finance, a large portion of the respondent business
visionaries have picked personal investment as their fundamental wellspring of account

 In debt financing, 23.8% opted for bank loans

Figure 9: Financing type

Figure 10: Debt financing type

35
a) Obtaining Finance

 52.7% of the respondents claim that they faced obstacles in obtaining finance from the
different sources, while just 9.5% disagree with this statement

Figure 11: Obtaining finance

b) Dedicated Finance Personnel

 33.3% of respondents have a dedicated person for handling accounts, while the same
percentage of respondents have person a who handles accounts as a part of his/her
responsibilities. The remaining 33.3% handle accounts by themselves

Figure 12: Dedicated finance personnel

36
 79.2% of the respondent entrepreneurs agree that the lack of a dedicated finance
personnel causes difficulties in managing finance, out of which 9.5% strongly agree with
the statement

Figure 13: Absence of finance personnel

c) Delayed Amount Receivables

 72.4% of respondents agree that they faced challenges in delayed amount receivable,
whereas 23.8% disagree claiming that they do not face any challenges

Figure 14: Delayed Amount Receivables

37
d) Getting Credit limit or time

 76.2% of respondents feel that getting credit limit and time with their vendors is a
challenging task, while 14.3% disagree with the statement

Figure 15: Credit limit & time

38
III. Government Fees and Regulations

a) Government Fees

 71.4% of the respondents feel that government fees are causing a challenge to their
business, out of which 23.8% strongly agree

Figure 16: Government fees

b) Government Permissions

 52.4% of respondents claim that they faced challenges in obtaining permission from the
Government, while 28.6% disagree saying that they faced no difficulties

Figure 17: Government permissions

39
 c) Government Regulations

 71.4% of respondent entrepreneurs completely understand all the UAE Government rules
& regulations related to their business, whereas 28.6% have only a partial understanding

Figure 18: Government Regulations

IV. Competition

 61.9% of entrepreneurs have a competitive strategy, whereas 28.6% do not possess a

strategy

Figure 19: Competitive strategy

40
a) Importance of Competitive Strategy

 85.7% of entrepreneurs feel that presence of a competitive strategy is necessary for the
growth of a business, out of which 38.1% strongly agree

Figure 20: Presence of strategy

b) Competitors

 81% of respondents agree that they have many competitors who are posing a challenge to
their business

 Out of these, 38.1% strongly agree that they have heavy competition

 4.8% disagree saying that they do not have many competitors

41
 Figure 21: Competitors

c) Knowledge about Competitors

 52.4% of respondent entrepreneurs know the competitors in their area which offer
similar services or products

 42.9% know the strengths and weaknesses of their competitors

 4.8% say that there are no competitors in their area

Figure 22: Competitor knowledge

42
V. Marketing

 47.6% of the respondents agree that they face difficulties in marketing their business, out
of which 23.8% strongly agree with the statement

 19% disagree saying that they do not face challenges in marketing

Figure 23: Marketing challenges

a) Marketing Techniques

 71.4% of respondent entrepreneurs use website & promotion emails for their
marketing

 57.1% use social media platforms like Facebook, LinkedIn & Twitter

 47.6% perform their marketing activities via exhibitions and tradeshows

 33.3% market their business by means of hand-outs, flyers & brochures

43
 Figure 24: Marketing techniques

b) Dedicated Marketing personnel

 52.4% of the entrepreneurs have a dedicated person for marketing activities

 19% take care of the marketing responsibilities by themselves

 14.3% of respondents have an employee who handles marketing as part of his/her

activities

 14.3% do not do any marketing

44
 Figure 25: Dedicated marketing personnel

 57.2% of the respondent entrepreneurs agree that they faced challenges due to the
absence of a dedicated marketing personnel, out of which 14.3% strongly agree

 9.5% disagree with the statement

Figure 26: Absence of marketing personnel

45
VI. Cost of Operation

 66.7% of respondents feel that they face a challenge due to cost of rental

 57.1% feel that cost of utilities like water, electricity, etc. poses a challenge

 38.1% say that they face issues owing to cost of labour

Figure 27: Cost of operation

VII. Reduced Demand

 61.9% of the entrepreneurs feel that the demand for their products / services has not
reduced in recent times

 38.1% agree that the demand for their products / services has reduced in recent times

46
 Figure 28: Reduced demand

VIII. Networking

 47.6% of the respondents occasionally participate in business networking events

 42.9% are frequently involved in networking at business networking events

 9.5% do not take part in any networking events

Figure 29: Networking events

47
  57.1% of entrepreneurs agree that absence of networking has posed a challenge to their
business growth

Figure 30: Absence of networking

IX. Culture

 85.7% of respondents agree that their people are flexible and adaptable to changes in the
enterprise, whereas only 4.8% disagree with the statement

Figure 31: Adaptability of people

48
 90.5% of entrepreneurs agree that their people are often involved in multitasking during
their work hours, out of which 47.6% strongly agree with the statement

Figure 32: Multitasking

 57.2% of respondents disagree saying that their people prefer to work individually,
implying that they encourage teamwork

 33.3% agree that their employees prefer to work individually

Figure 33: Teamwork

49
 71.4% of respondents assure that their employees participate in goal setting and goal
definition

 9.5% disagree with the statement

Figure 34: Goal definition

 85.8% of entrepreneurs agree that their employees’ opinions are valued and taken into
account, out of which 42.9% strongly agree

 Only 9.5% disagree with the statement

Figure 35: Employee opinions

50
  76.2% of respondents agree that their people are given regular & honest feedback
regarding their performance at the enterprise

 9.5% disagree with the statement

Figure 36: Performance feedback

X. Demography

 76.2% of the respondents agree that their people respect each other’s religious beliefs

 9.6% disagree with the statement

Figure 37: Religious beliefs

51
 80.9% of entrepreneurs give concessions to their employees for religious rituals &
commitments

 9.6% disagree with the statement

Figure 38: Concessions for religious commitments

 61.9% of respondents agree that doing business & networking during Ramadan
period is a challenge, whereas 14.3% disagree with the statement

Figure 39: Business during Ramadan

52
 52.3% of the respondents disagree saying that religion is not the criteria while
recruiting people for the enterprise, out of which 33.3% strongly disagree

 28.6% agree that religion is taken into account during recruitment

Figure 40: Religion in recruitment

 52.3% of respondent entrepreneurs agree that nationality is considered while

recruiting people for a particular job posting

 33.4% disagree with the statement

Figure 41: Nationality in recruitment

53
  52.4% of respondents prefer females for an administrative job in their enterprise,
while 38.1% have no particular gender preference for the job

 9.5% prefer males for an administrative job

Figure 42: Admin recruitment

XI. Employee Recruitment & Management

 28.6% of respondents feel that hiring full-time employees is the best strategy, while
23.8% feel that its best to hire more interns & less full-time employees

 28.6% feel that its best to hire more full-time employees and less interns, while 19%
think that an equal combination of both is the best strategy

Figure 43: Recruiting strategy

54
 66.7% of the respondent entrepreneurs hire interns, whereas 33.3% do not hire interns

Figure 44: Hiring of interns

 76.2% of respondents feel that the lack of visa issues is an advantage of hiring
interns, while 61.9% feel that cost reduction is an advantage

Figure 45: Advantage of interns

55
 57.1% of entrepreneurs feel that the increase in training activities and costs is a
disadvantage of hiring interns, while 42.9% feel that hiring interns is a short-term
solution for the job requirement

 57.1% feel that the limited commitment level of students is a disadvantage of hiring
interns

Figure 46: Disadvantage of interns

 57.1% of respondents hire interns for a period of 4-6 months, while 14.3% of the
entrepreneurs hire them for 1-3 months

56
 Figure 47: Period of internship

 71.4% of entrepreneurs feel that hiring interns is a good strategy to possess during
market difficulties and uncertainties, while 28.6% disagree with the statement

Figure 48: Internship strategy

57
  61.9% of respondent entrepreneurs face difficulty in managing their workforce, out of
which 14.3% strongly agree

 23.8% disagree saying that they do not face any difficulty in managing their
employees

Figure 49: Employee management

5.3 Rating of Challenges

The respondent business people appraised each of the talked about difficulties on a 5 point
scale. The weighted aggregate of every test was gotten by the product of the rating esteem for
the specific challenge and the number of respondents for every scale. Based on the ratings
given by the surveyed entrepreneurs, financial challenges are identified as the highest rated
challenge faced by them. Ratings of the various challenges are shown in the below table.

58
Challenges Rating Rating Rating Rating Rating Weighted Rank
5 4 3 2 1 total
Finance 4 7 6 2 2 72 1
Government Fees and 1 8 9 3 0 70 3
Regulations
Competition 2 10 4 4 1 71 2
Marketing 1 4 8 6 2 59 5
Cost of Operation 0 11 6 4 0 70 3
Networking 1 6 2 5 7 52 6
Cultural challenges 1 3 2 4 11 42 8
Demographic challenges 2 3 2 6 8 48 7
Employee recruitment & 1 3 10 6 1 60 4
management
Table 6: Rating of challenges

Employee recruitment & management

Demographic challenges

Cultural challenges
Rating 5
Networking
Rating 4
Cost of Operation
Rating 3
Marketing Rating 2

Competition Rating 1

Government Fees and Regulations

Finance

0 5 10 15 20 25

Figure 50: Rating of challenges

59
RESULT

60
6. RESULT

6.1. Result depicting Major Challenges

As identified by the respondent entrepreneurs, the major challenges which are posed to
the micro level entrepreneurs in United Arab Emirates are given below:

Challenges Faced by Micro Level Entrepreneurs

81 80.9
76.2 76.2
71.4 71.4
66.7
61.9
57.2 57.2 57.1
52.4
47.6
38.138.1

23.8
17.9
9.5 11.9

Percentage of Respondents
identified as challenge
Absence of networking
Cost of raw materials
Cost of Utilities

Cultural challenges
Competitors

Demographic challenges
Demand for product/service
Absence of Marketing personnel
Cost of Rent

Cost of Transport
Cost of labour
Government Fees

Difficulties in Marketing
Obtaining permissions from Govt.
Obtaining Finance

Delayed amount receivables

Difficulty in credit limit or time

Difficulty in managing employees

Absence of Finance personnel

Figure 51: Major challenges

The challenges which are identified by more than 50% of the respondents are considered as the
most critical challenges & are mentioned below:

I) Competitors

Being a global market, UAE includes entrepreneurs from all over the globe. Hence many local as
well as global competitors pose a threat to entrepreneurs. There are many easy ways of starting
up a business in UAE through easy methods of investment available in the country. This ends up

61
being one of the main reasons for more and more entrepreneurs to enter into the market a pose a
serious challenge to the existing micro level entrepreneurs. 81% of the respondents face
challenges from competitors.

II) Absence of Networking

UAE is one such place for businesses where a bigger network helps to grow your business
much further. As a hub for networking with events like GITEX, ADIPEC, etc., UAE
provides various opportunities for entrepreneurs to grow their business. But the entrepreneurs
feel that it is very difficult to find time for networking or interaction with other people who
could potentially help grow their business, as they are immersed in the day-to-day business
operations. Hence this lack of networking makes business people lose out on valuable growth
opportunities.

III) Absence of Finance Personnel

Not all entrepreneurs in the UAE have expertise in handling the financial aspects of their
business. Entrepreneurs feel that it always best to have dedicated finance personnel to handle
the finance/accounts section of the business. This is mainly because finance responsibilities
take away the limited valuable time available at the entrepreneur’s disposal to indulge in
more important activities. Hence some of the entrepreneurs recruit a person who takes care of
accounts along with other activities, just to reduce the cost.

IV) Obtaining Credit Limit or Time

76.2% of the respondent entrepreneurs in the UAE feel that they face difficulties in obtaining
an agreeable credit limit or credit time with the vendors. This stands as a prominent challenge
in all sectors of the micro level industry in UAE as many of the vendors stress for immediate
upfront payment upon delivery.

V) Delayed Amount Receivables

71.4% of the respondent entrepreneurs feel that delayed receivable payments from customers
have posed a serious challenge to their business. This is prominent in all sectors, but more

62
critically in the service sector enterprises where they have not received payments from
customers for months, and in some cases, even years.

VI) Government Fees

71.4% of the respondents say that government fees pose a challenge to their business. These
Government fees include charges like insurance, employee visa, labour card, license renewal,
approval, etc. It is a challenge in all the emirates including Dubai, Abu Dhabi and Sharjah.

VII) Cost of Rent

This particular cost is one of the most critical cost of operation and the most challenging in
the UAE. 66.7% of the respondent entrepreneurs face challenges due to the cost of rent. This
is mainly because of the high rent and real estate rates in the country.

VIII) Managing Employees

61.9% of the entrepreneurs who took the survey feel that managing their employee is a
challenging task. This may also be due to the fact that 66.7% of them hire interns. Managing
interns is not easy because most of them do not have prior work experience and more training
is required to make them competent for the job. Hence the entrepreneurs face challenges in
managing interns whilst reducing cost of wages.

IX) Obtaining Finance

Another important challenge which the micro level entrepreneurs face is obtaining access to
finance. 57.2% of the respondents claim that they faced roadblocks in getting finance from
various sources. Some of them also conveyed their experiences. The respondents, who relied
on bank loans, felt that approvals took a lot of time and there was lots of documentation.
They also said that banks in the UAE do not provide loans for companies which are less than
1 year old. Due to these challenges in loans, some entrepreneurs had to take a step in
breaking down their personal investment. Entrepreneurs, who opted for investment from
external investors, felt that there is no proper communication between them and the investor.

63
X) Cost of Utilities

Cost of utilities is another important cost of operation which causes a challenge to micro
level entrepreneurs. These costs of utilities include cost of electricity, water, telephone,
internet, etc. 57.1% of the respondent entrepreneurs feel that they find it difficult to reduce
this particular cost, therefore making it a challenging task for their business.

XI) Obtaining Permissions from Government

52.4% of the respondents claim that the strict rules and regulations of the United Arab
Emirates make it challenging for them to obtain permissions to access the various
Government resources. Though most of the surveyed entrepreneurs are completely aware of
the various laws related to their business, they still face this uphill task of obtaining
permissions from the Government which in turn has a negative effect on their business.

64
 6.2. Suggestions and Recommendations

As obtained from the survey questionnaire, certain suggestions & recommendations which were
given by the respondent entrepreneurs are given below:

 Try to get involved in multiple sources of incomes as the economy in UAE is uncertain &
it can change any day. So a good business can become bad without any prior knowledge

 Facing challenges during the initial stages of the business is normal. Hence, do not get
discouraged or demoralised while facing issues. Initial failure is better than initial
success. It paves the way forward, not ends

 A solid and prior preparation and planning is crucial to the smooth functioning of an
enterprise, especially in the micro level. Hence, it always best to prepare well before you
start anything in the UAE

 Entrepreneurs should not put themselves in a situation where they don’t have time to
assess these challenges or make quick decisions on how to tackle these issues

 Entrepreneurs must make sure that there is at least one experienced employee (min 10
years) whose methods and ideologies they agree with

 Ensure that the right number of people are available for the work in hand, else there will
be a lot time spent on re-working or correcting mistakes

 Government should develop relaxed labour laws to help the micro level entrepreneurs in
UAE

 Banks in the UAE should help the start-up enterprises, which are less than 1 year old, get
better access to funds

65
7. CONCLUSION

Since issues and challenges are faced by entrepreneurs at all levels in UAE, it is necessary to
identify these issues which pose a threat to the enterprises. This research helped with the purpose
of identifying the major challenges that affect the micro level sector enterprises in UAE.

The chief objective, scope and structure of the study were defined and the literature review at the
start of this dissertation was important in understanding the concepts of entrepreneurship,
mistakes of entrepreneurs, economic background of UAE and the business challenge surveys
already conducted. Survey methodology was used to clearly define what survey techniques were
used for the data collection from the sample entrepreneurs. Questionnaire design explained how
the survey questionnaire was designed and its various components based on the main challenges
to be surveyed. The data collected was analysed in a sequential manner and the challenges were
identified.

Hence the major challenges faced by the micro level entrepreneurs in UAE are surveyed to be
threat from competitors, absence of networking, absence of finance personnel, obtaining credit
limit or time, delayed amount receivables, Government fees, cost of rent, managing employees,
obtaining finance, cost of utilities and obtaining permissions from Government. As far as the
culture is concerned, most of the entrepreneurs follow a mixture of clan and market type of
culture. The entrepreneurs who took the survey gave some suggestions & recommendations
which may help in order to overcome these challenges.

66
8. REFERENCES & BIBLIOGRAPHY

1. Book: Hisrich, Robert D & Michael P (2006), “Entrepreneurship”, Published by

TMH, 6th Edition
2. A Journal paper: World Bank Group. 2014. Doing Business Economy Profile 2015:
United Arab Emirates. Washington, DC. © World Bank.
3. “Entrepreneurial key success factors”, Entrepreneurship in a box website,
http://www.entrepreneurshipinabox.com/
4. “UAE History”, Embassy of United Arab Emirates website,
http://www.uaecd.org/uae-history
5. “Why Dubai”, Dubai FDI, DED website, www.dubaided.gov.ae
6. “Economy Background”, Sharjah Website, http://www.sharjah.com/v/economy/
7. A Conference paper: SME Financing in the UAE, Abu Dhabi Entrepreneurship
Forum 2013
8. A Journal paper: Challenges in Entrepreneurship and SME Research, European
Council for Small Business & Entrepreneurship
9. A Conference paper: Sharjah Chamber of Commerce & Industry, SMEs Members
Initiative.

10. A SCCI Publication: Al Tijarah, Sharjah Chamber of Commerce & Industry, Volume
43

11. A DED Publication: “Dubai Business Survey Q2 2014”, Economic Studies & Policies
Division, DED website, www.dubaided.gov.ae

12. Book: Malhotra Naresh K., Marketing Research: An applied orientation. Pearson
Education, 2009, 5th Edition

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