Top 5 things SMEs can do to compete with Multinational Manufacturers

A guide to building a niche set of skills and capabilities, that will help you compete and outperform multinational companies.

Multinational companies (MNCs) are large scale operations that cover multiple geographical and political environments, structured carefully to leverage the best possible combination of resource placement that maximizes profits as a whole. With the opening of the global economy, these giants offer products at cut throat prices, make use of economies of scale and brand value to compete with local manufacturers. The dilemma of a small or medium enterprise (SME) is pretty clear then – How to compete with such a giant?

Well, let us assure you, it’s not the end of the world. Several small companies continue to thrive in the face of such competition, sometimes even holding a larger market share than them, thanks to some interesting advantages they build for themselves.

Fewer Products (Specialization)

Most entrepreneurs that operate in the B2B segment, start as generalists taking up whatever work a customer throws at them. They rely on the size of the market, and initially focus on increasing only their revenue, not market share. As the needs of the industry evolve and with external competition, these companies are unable offer specialized or high value products and lose market share over time.

A more focused approach to product selection brings several benefits to the company. By identifying your own competitive advantages, and focusing only on fighting battles that offer you a better chance of winning, you can capture a larger market share. Specializing in a few products that you can identify as your niche also allows you to cut out the noise. You can concentrate more resources per product, spend more time dealing with a limited set of problems, benefit from lesser diversity of equipment and tools and ease your work towards building a brand.

For e.g., Indigo entered the Indian aviation market and become profitable quicker as it was able to keep their costs lower by leasing only one type of aircraft, the Airbus A 320. This helped them train all their pilots, air hostesses, maintenance crew for only one aircraft and still switch to locations where demand was higher, keep lesser spare parts for maintenance and build on lessons from problems faced across their fleet.

Invest in your team (Education)

Big companies spend a lot of time and money in enhancing their employees’ capabilities. Trained employees perform the same work faster and better. Employees are also known to stick around longer if they see the possibility of growth (both financial and intellectual) in the company they work at.

The benefits of investing in your employees are two fold. They perform their tasks more efficiently and reduce wastage of resources. You also instil in them a sense of belonging and equip them to perform their jobs better.

Make Quality a habit

It goes without saying that quality is the main stay of competitive advantage. Unlike the protections that previous generations of entrepreneurs enjoyed, both geographical and political, today’s entrepreneurs are exposed to global competition from the first day and can only compete when their product speaks for itself. Improvements in quality helps a business have happy long lasting customers, referrals, brand value, reduced wastage and downtime, faster problem solving and higher efficiency.

Quality is ensured by creating systems and system driven processes. Using systems driven processes allow for each person to know their role and tasks and provide a ready reference for when exceptions are made. Your processes are more predictable and every employee become used to a no tolerance environment.

Invest in Data and information systems

“Data is the oil of the 21st Century”

-Gartner

The Companies of the 21st Century generate loads of untapped data. While a lot of this data is captured in paper form, it is mainly for record keeping purposes and not analyzed or acted upon.While Industry 4.0 has been heavily leveraged and adopted by large companies, smaller companies continue to function without any access to such technologies due to the heavy initial investments and low rate of production.

 

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