Less developed countries capability to face global economic challenges depends so much on the stage of development of their small and medium enterprises (SMEs). Nevertheless, SMEs competitiveness in Tanzania and other developing countries face a number of encumbrances hindering their success in both local and international markets. This paper undertakes a thorough review of the factors affecting SMEs competitiveness in Tanzania. Appropriate existing literature is reviewed through library research by which constraints facing SMEs such as: bureaucracies in the legal and regulatory framework, poor infrastructures, inadequate business skills, and limited access to finance are identified, inter alia. The study looks also at the other developing countries' performance, specifically, with a brief illustration of the export success case of Jamaica. Based on the findings accentuated in the literature and the data analysis, policy recommendations for the improvement of SMEs competitiveness are made accordingly. Among the several implicated policies are: the government should continue to institute environment conducive for businesses, promote the use of research and development outputs, emphasise business agglomerations and sharing of capacities, and continually propagate entrepreneurial attitudes and skills.