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Competing with giants — Survival strategies for SMEs

In economics, competition is said to be the rivalry among sellers trying to achieve such goals as increasing profits, market share, and sales volume by varying elements in the marketing mix.

Competition exists in every field, and it is good for the growth of any economy. That is why economists are usually in support of the free enterprise system. “The basic rule of free enterprise: You must give in order to get.” — Scott Alexander.

However, the current economic climate makes it more challenging for small and medium-sized Enterprises (SMEs) to compete with bigger, richer and more established companies in various sectors of the economy. In Ghana, for instance, what SMEs are desperately searching for now is survival ‘pills’ to keep their heads above water rather than engaging in any form of direct competition with their arch rivals, the big multi-national companies (MNC).

The reason for this is not far-fetched. The big companies have shock ‘dampers’ just as we have in the automobiles. This is something that guarantees their stability and firmness of in case of unexpected shock.

This is not the case with SMEs: the harsh economic conditions prevailing in the country has made competition a luxury to many of them. Instead, the difficulties have compelled them to think survival and not to contemplate competition with their ‘big brothers’.

The system did not provide enough coverage for these SMEs against the perils of dying prematurely, and if they manage to survive on their own after many ups and downs they still have to cope with stiff competition from the ‘giants’ of the land in an unlevel business environment as a result the state’s free enterprise policy.

The reason for this article is not to solicit for government assistance on behalf of SMEs in the country, which likely would not be too forthcoming considering the massive challenges confronting government itself. Rather, it is to help these SMEs to think inwardly and find solutions that is durable and enduring to their continuous survival and relevance.

Let us attempt to do a simple SWOT analysis of SMEs business so that we can come up with informed recommendation that is capable of leading them out of the doldrums and assist them to stay afloat.

Looking at the strength of SMEs you cannot but mention things like Flexibility in decision-making, personalised product offerings and packaging; Owners’ control and personal involvement; Closeness to the market and flat management structure.

Some of their major weaknesses include Lack of Quality Consciousness, Under utilisation of capacity, Lack of Financial strength, High percentage of absenteeism among staff and owners, Lack of proper work culture, Lack proper management orientation; High turnover of key personnel; Lack of planning; Lack of long-term strategic focus; Lack of infrastructure facilities; Inadequate attention to research and development;

Their biggest threats are Competition from large companies & multinationals and a rise in customers’ expectation. Between the strengths and weaknesses enumerated above lie the opportunities and threats for SMEs in any developing economy.

The Biggest Challenge

A lot of times when you listen to people talking about challenges facing SMEs, chief among issues often put forward is lack of accessibility to credit facility. The argument is faulty from the point of view of a lender. The reason why most SMEs are not attractive effective enough for financial support by financial institutions is simply lack of proper financial records or a business system that gives lenders confidence the business is a going concern or continuity is not in doubt.

Lending institutions will always like to lend to business, whether big or small, that have sound financial records. This is the bane of our SMEs in West Africa — unwillingness to put financial structures in place, which may be the result of unwillingness to disclose the company’s correct financial position to avoid tax authorities’ charges or staff members learning the prosperity of their employer’s business to prevent any agitation for salary increments.

This is one of biggest undoings of SMEs. They have done this repeatedly without paying attention to the negative impact of this action. Spending a little GH?1,000 or less to hire a good accountant to prepare monthly management accounts for the business and another GH?3,000 per annum to pay an external auditor to authenticate the report is all that is needed — but most SMEs rather look at that GH?15,000 or thereabouts as a significant expense item to be avoided by all means, thereby denying themselves the benefit of accessing constant financial support from banks and other lending institutions.

SMEs’ major Strength

In a crowded and competitive marketplace, the real trick is finding a gap and having the right product to fill it. SMEs are better-placed and have succeeded over time by providing services that their much larger competitors are simply unable to do as efficiently or at a better cost. The key to competing as a small business is to stay focused on your market and not be tempted to deviate into other areas, because of profit temptation or any other reason — as you then run the risk of diluting your offering and undermining what you have established.

SMEs should recognise that a larger business is not necessarily its competition. The question they should rather ask is: how am I different? If the competition is larger it will have a lot of advantages that SMEs don’t because of their scale and size. SMEs should not attempt to compete on those levels. They should instead use those differences to their advantage and compete as a different business.

Identify the potential customer’s needs and figure out where your company has a competitive edge — for example, offering more personalised service; ability to customise a product or service to meet the customer’s needs; and being more nimble and therefore able to respond to the customer’s needs more quickly.

Competition with a large company can be the impetus for creating strategic alliances with other small businesses to expand the range of products and services you can offer and bid for projects as a team.

In the competition for market presence, find a way to ride the coat-tails of the large competitor. The very presence of the large company may expand the market for your products or services. Build on what differentiates your company; identify a niche that you can fulfil better than anyone else and build opportunities to expand.

To compete favorably with ‘Giants’ without losing your market space, you must align your assets with industry characteristics. What does this mean?

SMEs must leverage on the goodwill or unique selling prepositions (USPs) they have built over time: the rich knowledge of the local market, personalised service, proximity of decision-makers to the customers etc. These are goodwill that may be very difficult to quickly copy by your stronger and richer MNC competitor. SMEs must continuously fortify these existing competitive assets to stay at the top and make competition irrelevant.

Why SME ‘David’ Shouldn’t Fear Big-Business ‘Goliath’

Almost every small business faces a Goliath. ‘’When the circus comes to town, every vendor sells more balloons”. So, if Goliath targets your hot new product, come out with another better and hotter product. If Goliath undercuts your prices, focus on connecting with customers on a personal level. If Goliath targets your customer demographic, build a user experience that it can never match.


Here are some tips on how SMEs can compete with large corporations in your sector and still thrive.

Don’t fall at the first hurdle

The biggest mistake of many SMEs at the first stage is to underestimate how competitive the market place is going to be, or overestimate their potential sales revenue with little or no consideration for competition.

Look to big business

To get a better understanding on the dynamics involved, it is worth looking at how larger businesses have grown in your targetted sector. What are their successes and what mistakes have they made?

Know your competition, know your customer and know your business

It is also important to work out how you can compete with them. Big businesses can be extremely efficient; their large scale gives them the advantage in areas such as supply-chain negotiations and staff efficiencies, which can produce great value for the consumer.

Play to your strengths

Large corporations can make it hard for SMEs to compete because they can afford to run sales lines at a loss to get customers through the door. But the greatest advantage SMEs have is the ability to implement ideas quickly and get them onto the market early.

Invest in Research and Development (R&D)

Of course every business needs to keep costs low, but research and development — and also promotion — are crucial parts of business planning. SMEs should have a product that is not only efficiently produced but also relevant to the customer. Only then will you be able to compete on the same stage as big businesses.

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