Strategies of the Development of Entrepreneurship and SME

Federal funds, private capital, especially because of forthcoming winter Olympic Games inSochi. The criminal situation in the region is not so sharp as in its neighbouring countries butthe closeness of Chechnya makes especially international investors concerned about possiblelosses. Ukraine is right in the middle of two peers.Domestic demandThe growing number of rich people in the country, and primarily the size of the middleclass is the most critical issue to determine the influence of the demand conditions over theSME sector. Among the three countries Russia has the largest population and the long lastingtradition for people from its Northern territories to spend vacations on a Sea cost. The climateof Ukraine and Moldova is not as diverse as in Russia. The growth of savings of Russian peopleresults in the dramatic increase (especially during last 5 years) of demand. Ukraine isexperiencing a much lower increase of domestic demand for the services in the region, andnotably it depends on waves of political stability in the country. For Moldova the domesticdemand is quite low.Global demandWith dramatically growing influence of the global economic, social, political andtechnological factors over the countries’ life the global demand for the SME businesses productsand services in the Black Sea Region. The major interest in its development is represented bythe population of the neighbouring countries. Thus economic growth and increasing size of themiddle class in Russia is generating a source for the development of the entire region. Russiansare the often guests in Ukrainian, Azerbaijan’s and Turkish resorts as well. But the luxuryservices are usually sold primarily to EU citizens. The growth of the interest of Europeans inRussian and Ukrainian resorts creates a potential for the SME sector development. The onlyrequirement for that is the country’s economic and political stability. The image of the region isfar away from the desirable but Russia’s efforts for having Olympic Games hosted by Sochicould result in the boost of the interest of the foreign tourists in the whole region (Ukraine &Russia). Another argument should be taken in account as well – the European, and globalcommunity is getting more exposed to internationalization, to learning more about differentcountries, regions, cultures, and to travelling.Thus global demand could become a key for the incredible growth of SME economy inthe region.SME strategy, structure of the sector, and rivalryThe rivalry in the SME sector industries is generally considered to be one of the mainindicators of their developments. The most competitive industries attract the increased numberof startups.Porter’s industry analysis could be used here to get a clear understanding of the rivalryin the SME sector in each of the trio countries.The external strategic analysis requires the application of “Five Forces Model” introducedto the academic and practicing community of managers by Michael Porter as well (Porter,1979), and added by the six force (A. Grove, CEO of Intel) – complementary products andservices. The five forces are: bargaining power of suppliers; bargaining power of buyers; threatof substitutes; risk of entry by potential competitors; intensity of rivalry (Figure 2).All of the forces, except bargaining power of suppliers (since they again belong to theSME sector, which is represented by small number of firms), are weak. The scale of weaknessdiffers in Russia, Ukraine and Moldova, with the worst situation for the last one. In this case it72