Can small businesses compete with large enterprises?

There is a general perception that SMBs are scared of competing with large enterprises. Can’t small businesses match up to large players in their segment? Here are the many ways they can.

Every small and local business owner knows that competition isn’t confined to local peers. To survive and grow, MSMEs have to battle with local businesses and large conglomerates with deep pockets. The larger companies can easily outsmart small businesses, both in the physical and the digital worlds, thanks to the backing of solid resources.

It may seem like you’re fighting an unwinnable battle, but there are plenty of advantages that small businesses have over their larger competitors. Only, small business owners must identify and leverage them to their advantage.

We are all aware of the big names in the market – in tech, for example, there are Apple, Google, Facebook and Microsoft. In the fast-food space, McDonald’s, Burger King, and KFC, and in retail, you have Amazon, Walmart, and Reliance. Most of them are multinationals and have their presence everywhere in the world. 

How can a small business owner compete with these larger, established businesses, in the hope of making success? What a small business owner must realise is that all these biggies were startups or small businesses once and grew to the current size, competing with large enterprises of that time. 

Factors that can help SMBs compete 

Those who have grown to the big level today have had certain qualities that helped them. These include: 

Idea and innovation

Most small companies that started with great, innovative ideas became large enterprises later on. Ideas alone are not enough.

Innovations to pursue the idea are equally crucial, if not more. Again, it’s not enough to just be innovative; you also have to stand by your ideas with conviction. 

You must have a good idea at the centre and the belief that this idea is worth pursuing. Entering a market with an innovative product or service is the road to success. The faith in your ability to innovate is as important as the innovation itself at every stage and lifecycle of the company and its products. Many Indian startups that are now members of the unicorn and decacorn clubs stand testimony to this.

Niche market

Small companies must identify the market they want to initially target, probably segments that are largely ignored or left aside by big businesses. This is because a small group has very specific needs, and specific needs are much easier to meet than generalised ones. While large enterprises tend to ignore such small groups to focus on targeting a broad range of demographics, being a small business allows you to reach niche markets more effectively.

Once you address the needs of a smaller group, you will have that group’s trust and they become your loyal customers, They will then do marketing for your company through referrals, reviews, and testimonials. This circle of trust that slowly grows will eventually allow you to compete with the large business market by creating your niche markets.

One example of this strategy is Facebook – it started as a Harvard-only social network and expanded to the general public globally through a loyal user base and then slowly grew outwards.

Customer service

While initial traction and customer acquisition are important, retaining customers is more crucial for the long-term growth of a business. The quality of customer service plays a pivotal role in customer retention, churn, and referrals. Bigger businesses often fail when it comes to customer service and support. Large companies have been leveraging technologies like AI to automate customer care and service in the last few years due to which they have lost the personal touch that most customers consider important.

Big businesses often lose customers due to customer frustration with automation and the inability to receive assistance, and small businesses can take advantage of the situation. Once small businesses make a personalised connection, customers will be keen to continue doing business with you – even if it costs them extra time and money. Customers rate customer service as important as any product or service you offer. The majority of people use post-sales customer service as a factor when deciding whether or not to do business with a company.

Customer feedback

Businesses of all sizes get customer feedback, but a small business can act on it quickly and in a more personalised manner to turn it to their advantage.

Feedback can come in several forms - voluntary feedback in reviews, talking to customer care, or posting on social media. Companies also create surveys or online polls, participating in a more diverse group of customers. Acting on feedback from customers improves the trust and confidence of customers in your company and products. A customer who feels heard and valued is a customer for the long term.

Cost structure

While large enterprises have the advantage of economies of scale and smooth cash flow, small businesses enjoy the benefit of a comparatively lower cost structure. This advantage comes mainly from the lesser overheads compared to large enterprises that suffer from huge overheads in the form of higher salaries and benefits, investments in infrastructure and facilities, etc.

Add to this the flexibility to transform fixed costs to variable costs in many areas. For example, a large enterprise might already have invested a substantial amount in digital transformation initiatives whereas small companies can make use of digital tools available in a cloud environment on the subscription model, making such expenses operating expenses rather than capex.

Streamlining and agility

Thanks to their less rigid and formal structure, small businesses are in a position to take swift decisions and implement them in an agile way. This is a big advantage over large enterprises where decision making is a time-consuming process and - at times – comes too late. Small companies score in agility not only concerning decision making but in every part of operations.

Streamlining processes and workflows automate or make decision making quick and infuse efficiency in operations. This agility gives small companies an edge over their large counterparts. 

Social media presence and marketing

Large companies with a huge marketing budget can engage in any kind of marketing campaign, which is difficult for small businesses. However, that should not discourage you as a small business owner.

You can roll out various digital marketing strategies at no or low cost to reap huge benefits. With proper strategies, small businesses can outsmart large enterprises by bringing visibility and presence to the former.

Social media, if used properly, can help you create leads and prospects organically. Digital marketing makes it easier than ever for small businesses to create a larger presence. Plus, it allows them to take advantage of conventional marketing methods wherever required, leveraging the inputs received through modern data and analytics techniques. Proper use of digital media and its marketing tools can help create a bigger presence than the big competition.

Hire the best employees

It is not easy for small businesses to attract good talent because of the better monetary/non-monetary benefits and environment that large enterprises offer. In addition, employees get attracted to the brand name of large businesses that provide them with esteem and prestige. 

However, small businesses that are run professionally with good corporate and human resources policies get good online reviews. Today’s employees tend to look at these before joining a new company. Small businesses, though unable to match the benefits of large enterprises, have an edge by way of a more cohesive working environment, flexibility, and opportunities to learn, develop and diversify their skills, and grow fast in the company. 

Presence in communities

One of the biggest advantages any local business has over a large enterprise is its presence and proximity to local communities and population. This helps small businesses overcome the lack of huge budget or marketing power of a big company, especially in its niche market.

SMBs must take the time to get to know their local communities and learn a bit about their personal lives and expectations. They must participate in local events and functions, understand their expectations, provide support to the community, and gain their loyalty.

Customer loyalty 

While many big enterprises have various customer loyalty programmes, small businesses can create a loyal programme that appeals to their niche customer base. In addition to loyalty programmes, personal connection, customer services, and other factors help build long-lasting customer loyalty. 

In a nutshell

Small businesses enjoy many advantages over their larger counterparts. What is important for small businesses is to identify those strengths and leverage them to their advantage. The ideal strategy of small businesses to compete with biggies is to fight them in their local, niche market and grow by leveraging that customer base. Without this, it will be difficult to survive and grow amid the many large enterprises.

Edited by Teja Lele Desai


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