Competitive Advantage of Small and Medium Enterprises - Essay Example

Competitive advantage Small and medium enterprises Introduction In an age of globalization and competitive businesses, it is becoming increasingly difficult for small businesses to survive. Most small businesses operate in nearly perfect competitive markets whereby unit businesses deal in similar products. Small businesses compliment the age of large businesses whereby sizeable economies of scale are hard to attain. All the same, small and medium enterprises can attract large revenues and gain competitiveness when right practices are engaged. These practices involve proper management and marketing skills that place such a SME on a competitive map. The choice of a competitive strategy helps a firm navigate the competitive environment that defines one’s business. Aims of research This paper concerns with unraveling the sources of comparative advantage among firms. Comparative advantage regards having the ability to satisfy a market in the best way than any other firm. In addition, the paper shall unravel how strategic management influences SME’s. Sources of comparative advantage Segmentation differentiation Segmentation differentiation is a useful competitive strategy for an SME. Segmentation differentiation differs with differentiation in terms of product making. This is because segmentation differentiation concerns with dealing a specific market segment (Julien 2003, pp. 230). In this case, a business studies a market segment and determines different factors that define its existence. For instance, the business studies the general preferences and needs of a given market. In addition, a SME studies the aggregate income levels of a market segment towards determining the price and quality level demanded by a particular market segment. This strategy differs from the idea of approaching a market in its whole form because a firm makes the risk of targeting a single market. There are, however, several benefits of choosing a given market segment. To begin with, an SME has the high chances of exhausting the market. Once consumers are satisfied from particular services, they are highly likely to manifest customer loyalty even in cases whereby new competitors enter the market. Innovation Innovation occurs in tests of produced uniqueness that a firm has in a poll of competitors. It is crucial to highlight that innovation is a traversing concept that may occur in every level of the supply chain. To begin with, it is essential to examine uniqueness in production. Innovation in production regards using the available resources to produce that does not exist in a market. It also concerns with designing a production process that carets efficiency in terms of time and costs. This is witnessed in large firms such as Toyota, which capitalized in just-in-time production methods early in their development. In this sense, a small firm is able to save on production costs thereby enlarging the profit margin. In cases of regional or global economic and financial crisis, a business is still able to stay afloat. In turn, a business supplies the market even if other firms are crippled by an aggregate reduction in consumers’ purchasing power. Innovation that deals with creating a product in a new sense earns an SME the patent of distributing such an item. In the end, a business has high chances of becoming a large firm because patent limits any possible competition that may arise out of a market. It is essential to highlight that in cases of unpatented product, the company can benefit from the brand that it earns as the first producer of such an item. Consumers are highly to believe that the innovating firm offers a given product at the best quality. In other instances, a business may produce bespoke goods that customers’ tastes become primary prior to production. In such a case, a business with highly skilled employees may produce goods on request by particular customers. This suggests that a given customer offers direction on how a good should be produced. In the ends, the firm directly satisfies the need of customers according to their unique preference and needs. This differs from the idea of mass customization whereby Innovation may also occur in terms of how a firm markets and distributes its programs. For instance, a marketing strategy that regards offering high quality products in fewer quantities than other firms may increase customers’ purchases and ensures an efficient supply chain whereby stocks are cleared. E-business and marketing In the globalized age, conducting business electronically has become a norm. This suggests that it has become a necessity for a business to integrate its operations with information and communication developments in the real world. The closer a SME modifies its operations towards modern IT developments, the closer it edges towards intended market. It is crucial to underscore the fact that IT can serve both as a business and as a marketing tool. Small firms have emerged out of IT ideas that they build to propel such firms into international entities. For instance, certain firms have specialized in creating mobile applications that they sell for different purposes. The fact that such apps can be downloaded and used by a wide number of people makes a business gain a huge market share. In addition, firms that utilize e-stores and websites to sell products benefit from the idea that customers can scrutinize and access goods without visiting a business’ location. IT application in SME’s serves a huge role. In the recent age, firms are investing less in production because marketing consumes much business funds. This means that capturing a market segment depends less on production efficiency, but relies on effective access of a market base. There are different forms of internet platforms that aid marketing in the recent age. To begin with, the use of websites is almost becoming mandatory for an SME. This occurs as the cost of creating websites become smaller. A website has become the platform from which consumers gain the general impression about the services and the brand of a company. This, especially, is necessary for a small enterprise since a firm, at its young age, has not built a brand that customers instantly recognize. Since the World Wide Web is a vast platform, it is necessary for firms to place the URL’s of their websites in the packages of products. More essentially, businesses are complimenting and linking their websites to social networking sites. Social networking sites, such as Facebook, provide the advantage of intimate interaction with customers. In this sense, customers provide instantaneous feedback on their impression about services and the nature of products. It is essential to emphasize that social networking sites are indispensable ideas for understanding the consumers’ psyche. In this case, a business collects information about shifting customers’ attitudes. Strategic management Strategic management in a business concerns with designing operations according to a specified vision, mission, and general strategies. It is crucial for a business to design a general strategy of approaching a market. For instance, a business may identify the customer as the sole determinant of conducting operations. In the new age, strategic management concerns with efficient management of supply chains. Supply chains should occur in the sense that allows proper management of costs and effective satisfaction of customers. In the age of green business, minding environmental concerns becomes a key strategy of eventual survival. Customers increasingly demand that their favorite brands mind the welfare of other parties beyond the core business of profits. Conclusion Gaining comparative advantage requires several strategies from a SME. To begin with, a business can highly profit from segmentation differentiation. In this case, a business identifies a given market segment and designs a set of production and marketing strategies that directly satisfies the market. In innovation, a firm aims at uniqueness that either creates efficiency or helps garner a large share of the market. On the other hand, e-business regards electronic integration of business operations. SME’s increasingly require strategic management that helps a business capture the market and stay on course. Bibliography Julien, P, Ramangalahy, C 2003, ‘Competitive strategy and performance of exporting SMEs: an empirical investigation of the impact of their export information search and competencies,’ Entrepreneurship Theory and Practice, vol. 27, no. 3, pp. 227-245. Read More