How SMEs can take on the Goliaths

CEO'S Note, Tradeindia.com, July2, 2013

"When we started our business, our target market was dominated by large companies, and this is the case even now. It was nearly impossible for us to compete on price. So we focussed on offering high quality individual products unique to us, and this worked well. In addition, we placed customer service and customer relationships on the top of our priority list, and this helped us even take customers away from the big companies." This is how a New Delhi based small business entrepreneur once reacted when I asked him how his small business managed to coexist and compete in a big brand dominated market.

This is a story from which several business lessons can be learnt. First, it is a misconception that small and medium scale enterprises don't stand a chance of competing with the bigger players in the market. A small business can survive the competition and even gain an edge over the big boys. Second, price is not everything, but the value a business offers always is. When you establish business value and tie your pricing to that value then there is no need to focus entirely too much on pricing. Third, customer service and customer loyalty can play a significant role in small business success.

It is a well-known fact that small businesses inherently enjoy several advantages over large businesses in several ways — there is scope for easy communication and flexibility in making decisions — but what makes the major difference is whether or not a small business makes the best of this strength. Large businesses, often face more barriers in communicating with customers than small businesses do, but this does not mean a small firm should be complacent. It should always try to dig out opportunities and try to be more and more responsive to customers than everyone else. Every small business, even if it thinks it doesn't have barriers, should look anyway — it might have some.

Similarly, it is said that it is easier for small businesses to feel its own pulse. They are so much closer to their customers that they can easily get direct customer feedback to feel their changing needs and interests immediately, and when this understanding is combined with their inherent openness to experimentation and ability to take faster decisions, it also offers a great springboard for innovation. But again, it is unwise to expect that this will happen automatically because you're a small business. Unless you keep your eyes open and act on these advantages, you can't expect the full benefit.

Large businesses are fund-rich, they usually have greater numbers of employees, they enjoy stronger brand recognition, they can spend more for R&D and advertising — but despite this small businesses can coexist and even compete in big brand dominated markets by virtue of their own set of advantages with good preparation and determination and by getting their approach right. I would like to invite your feedback on this. As a small business entrepreneur, what major challenges do you face from your large counterparts and how do you deal with them?