There are many reasons why small and mid-sized businesses (SME) can successfully compete in their industries with larger competitors, but there are perhaps even more reasons why they cannot. Small businesses are agile, flexible, and often faster to adapt to a changing environment than their large rivals are. But when it comes to swimming in an open ocean weathering strong winds, large waves and massive storms, there is no comparison to a large, strong ship, deep resources, advanced navigation, and disciplined crew.
Large companies, after all, have big competitive advantages. Their brands are more recognizable. Their large financial resources allow them to easily outspend small business on advertising and marketing so their products are even more recognizable. The economies of scale are also playing to their advantage. They can undercut small business on pricing, they can afford building or buying bigger manufacturing facilities, stores, more technologically advanced equipment, and the list goes on.
Competition is an integral part of doing business and we accept it as part of life as a small enterprise. Businesses strive to outperform each other to win a greater share of market demand. Yet going head on with a much larger competitor can be very risky and intimidating.
So how can a small business compete?
“It is not the strongest of the species that survives, nor the most intelligent; it is the one that is able best to adopt and adjust to the changing environment in which it finds itself.”
- Charles Darwin
There are advantages of being a small enterprise. Among them speed, agility, close relationships with customers, and trust. In North America, the number of people who trust family-owned businesses is more than 50% higher than those who put their trust in public companies.
Analyze your competitor’s weaknesses and your business strengths
In an effort to gain a stronghold in the market, analyze your competitor to identify their strength and weaknesses while carefully considering how your business can measure against those factors and respond. This framework is widely known as a SWOT analysis, an acronym for Strength, Weaknesses, Opportunities, and Threats.
When doing the SWOT analysis, be focused on business basics: customer base, distribution channels, pricing, and marketing strategy. Search for gaps in their armour and try to identify your competitive advantage and opportunities left by your competitors.
Plan your Business Strategy
Now that you know your competitor’s business strengths and weaknesses, it’s time to plan how you are going to compete with them. One thing that consistently separates winners from losers when successfully competing with large rivals is their approach to strategy.
“The only way to beat the competition is to stop trying to beat the competition.”
- W. Chan Kim and Renee Mauborgne, Blue Ocean Strategy
In the Internationally acclaimed business strategy book “Blue Ocean Strategy” based on the study of over 150 real-life business cases that took place in 30 industries over the period of more than 100 years, the authors, W. Chan Kim and Renee Mauborgne, noticed that most businesses tend to engage in head-to-head competition in search of sustainable growth. However, competing head-on in today’s competitive markets creates nothing but a bloody “red ocean” where business rivals fight for a share of a shrinking profit pool. The writers argued that continued success is increasingly achieved, not from battling competitors, but from creating “blue oceans" of uncontested market space where the competition becomes irrelevant.
Study the competitive analysis you developed and compare it to how you do business versus your competitor. Don’t compete where you are at a disadvantage, don’t go against your larger competitor’s strengths. Instead search for opportunities to bypass your competition and make your own “blue ocean” in the market demand.
At this point you need to create a written business plan that will be your guide to keeping your business on target. Your business plan will keep you focused on your strategic goals, help you allocate resources properly, keep you moving forward when faced with unforeseen complications, and help making the right decisions.
Engaging an experienced part-time Chief Financial Officer (CFO) or special purpose CFO to collaborate on the creation of business plan could help you to ensure your business plan is realistic from the point of view of your financial resource constrains.
Focus and act decisively
Once you have the roadmap for your business you will need an extreme focus, rigor, and discipline to achieve your business plans.
As mentioned before, one of the biggest advantages of the small business is its agility. The bigger a competitor, the more difficult it is for them to react and change directions quickly. Small enterprises, in most instances, can be much faster in responding to the changing environment and industry trends.
A large company could take months and years to arrive at a decision to change directions adopting to a new trend. They will create committees, spend hundreds of hours in meetings and perform feasibility studies to substantiate their decision.
Small companies can advance by acting nimbly and responding quickly to anything from a local news story, unexpected events, overnight internet sensations, or an emerging change in consumer preferences.
Choose Your Fights
Never get into a battle you cannot win. If your large competitor has unlimited resources to undercut you on pricing, for instance, be very careful not to start a price war, in which the organization with deeper pockets will nearly always prevail. Instead, keep the fight on your own territory, where you’re strong, and build up on your competitive advantage.
If you’re a local business that prides itself for its relationships with local community and trust from its customers, then concentrate on developing a strong community and client base by hosting and participating in frequent events and enabling your audience to connect with your business and get to know your products. After all, the best marketing is the word of mouth from your happy customers.
Use Smart Tools to Your Advantage
Nowadays, it’s easier than ever for small business to reach a massive target audience. The days when small business had to spent a fortune for media advertisement, newspapers, and television just to reach mass audience are long gone. Today the smart adoption of online technologies, social media, and content marketing can put your business in the forefront of a tremendous number of prospective customers, with a very small investment.
Another important aspect of success is a well-made website. Building a good professional-looking website or online storefront is easy and requires minimal investment with website tools and templates like WordPress, WiX, Magento, etc.
You may also want to streamline many business administration tasks like customer relationship management (CRM), productivity and efficiency, resource planning, project management, communication, accounting, and more. So, look for the best efficiency tools for your business; they will help you to level the playing field with your bigger rival in ways that was not possible in the past.
Competing with a large company for most small businesses can be very daunting; however, if you stick with the robust business strategy and the right tools, you will be able to put up a good fight for your place under the sun.
CFOmasters brings the large company finance capabilities, strategic approach, discipline and expertise of a top-notch Chief Financial Officer (CFO) to small and medium sized companies at a fraction of the cost of hiring one full-time. We provide Part-time CFO, Interim CFO and Special Purpose CFO services, onsite or remotely. We offer a flexible engagement model enabling our customers to increase or decrease engagement level, thereby giving their business the opportunity of having the best CFO talent based on their unique business needs and budget. Doesn’t your company deserve the best? Visit CFOmasters to browse our services, hear from our customers, access valuable resources and more: www.cfomasters.com.