By Maxwell Ranasinghe
Introduction:
The dominance of multinational corporations (MNCs) in the global market presents significant challenges for small and medium-sized enterprises (SMEs) in Sri Lanka and in other countries. Although multinationals may possess significant advantages in terms of scale, resources, and brand recognition, SMEs can employ various strategies to compete and even surpass them in the marketplace. Numerous studies and research offer insights into effective strategies that can help SMEs compete and even surpass MNCs in the marketplace. This article critically examines key approaches for beating multinationals in the market, drawing upon scholarly citations to support the arguments.
Stop worrying but learn about MNCs.
As Alibaba’s CEO, Jack Ma advocates, learning about multinational corporations (MNCs) is of paramount importance for small and medium-sized enterprises (SMEs). Understanding the strategies, capabilities, and market dynamics of MNCs provides valuable insights that SMEs can leverage to compete effectively. By studying MNCs, SMEs can identify gaps in the market, learn from successful practices, and adapt their own strategies accordingly. Furthermore, learning about MNCs helps SMEs anticipate potential challenges, benchmark their performance, and identify opportunities for collaboration or differentiation. Knowledge of MNCs empowers SMEs to navigate the competitive landscape, make informed decisions, and position themselves strategically in the marketplace.
Developing Niche Markets:
One strategy for SMEs to challenge multinationals is to identify and focus on niche markets. Local entrepreneurs can understand the customers in their markets more than the multinationals without conducting extensive research as they live with them, and they know their culture and behavior. By targeting specific customer segments or specialized products, SMEs can carve out a competitive advantage. For instance, Zott, Amit, and Massa (2011) argue that SMEs can achieve success by leveraging their agility, flexibility, and ability to meet specific customer needs, which larger MNCs often struggle to address. Additionally, research by Christopher and Ryals (2014) highlights the importance of market segmentation and targeting in gaining a competitive edge.
Emphasizing Innovation and Creativity:
Innovation and creativity serve as vital weapons for SMEs seeking to outperform multinationals. SMEs are often more agile and adaptable, enabling them to introduce new products or services quickly. Your decision process is shorter and swifter than the big timers. Create a conducive environment within your company, majority of the innovations comes from your own people and not from academia or external consultants. Research by Amabile (1996) highlights the significance of fostering an environment that stimulates employee creativity, offering opportunities for innovation and experimentation. SMEs can empower their employees to contribute innovative ideas, take risks, and participate actively in the organization’s growth and success.
Use Digital Technologies
The rapid advancement of digital technologies and accessibility of it comparatively much lower cost than in the past, has leveled the playing field between SMEs and MNCs, providing SMEs with opportunities to challenge multinationals in the market. The expensive enterprise planning and CRM software that were available at high cost only to the advantage of MNCs now can be obtained by SMEs. You need not buy advanced computers or any other hardware or software to use them. Can rent on cloud even to run on your mobile phones. study by Brynjolfsson and McAfee (2014) demonstrates the transformative impact of digital technologies, enabling SMEs to compete on a global scale, reach wider audiences, and engage in cost-effective marketing strategies. Furthermore, research by Demirkan and Cheng (2017) emphasizes the role of digital innovation and the adoption of digital platforms to gain a competitive advantage in the digital era.
Collaborative Alliances and Networks
Collaborative alliances and networks offer SMEs the opportunity to pool resources, share knowledge, and enhance their competitive position. Research by Gulati and Gargiulo (1999) suggests that forming strategic alliances with other SMEs by forming industry associations can provide access to complementary resources and capabilities that may help overcome the disadvantages of scale faced by SMEs compared to MNCs. When Sri Lanka did great in the past, we had the culture of sharing ideas for the common benefit and worked together. There is no bar to repeat that if the business community change their attitudes. Additionally, the local universities not only have the ability to create new products and services, but great business ideas too. Do not let them be in the academic silos, it is your responsibility to contact them, discuss the issues you have and ask them to come with tangible answers toy our issues. It will surely foster knowledge sharing, and innovations and market expansion as argued by Hitt, Ireland, and Lee (2000)
Building Strong Customer Relationships:
Establishing and nurturing strong customer relationships can be a powerful strategy for SMEs to compete with multinationals. Understand the Sri Lankan customer types and the ways to handle them as our customers have unique characters where multinational may take time to learn. Sri Lankan SMEs often possess inherent knowledge and understanding of local markets and cultural nuances, which can be leveraged to gain a competitive advantage over multinationals. (Refer to authors video on “Understanding Sri Lanka’s Customer Types’ published YouTube) Listen to your customers and then to your employees, you will observe simple to major innovations taking place withing your company. Chesbrough (2003) emphasizes the significance of open innovation, where SMEs collaborate with customers to foster creativity and access resources that can fuel competitive advantages. Research by Luo and Zhao (2005) highlights the value of local knowledge in navigating complex business environments, adapting marketing strategies, and tailoring products or services to local preferences.
Quick Decision-making
Swift response to changes in the markets place always makes the winner. SMEs’ have a significant advantage over multinationals in making quick decisions and responding rapidly to market changes. Research by Eisenhardt (2017) emphasizes the importance of agility in turbulent market conditions. SMEs can adapt their strategies, processes, and products/services swiftly to capitalize on emerging opportunities or address evolving customer demands than the MNCs that has a complex decision-making process.
Conclusion:
By identifying niche markets, emphasizing innovation, leveraging digital technologies, and forming collaborative alliances and swift decision making, SMEs can challenge multinationals’ dominance. It is crucial for SMEs to recognize their unique strengths, exploit opportunities, and continually adapt to the dynamic market conditions. Through strategic implementation and careful execution, SMEs can position themselves as formidable contenders in the global market.
References:
Amabile T (2008) Creativity and the role of the leader, Harvard Business Review https://hbr.org › 2008/10 › creativity-and-the-role-of.
Brynjolfsson, E., & McAfee, A. (2014). The second machine age: Work, progress, and prosperity in a time of brilliant technologies. W. W. Norton & Company.
Chesbrough, H. W. (2003). Open innovation: The new imperative for creating and profiting from technology. Harvard Business Press.
Eisenhardt KM, (2017) Strategy Formation in Entrepreneurial Settings: Past Insights and Future Directions Strategic Entrepreneurship Journal. 11: 306-325. DOI: 10.1002/Sej.1257
Zott.C, Amit.R,and Massa L. (2011) The Business Model: Recent Developments and Future Research, Journal of Management Volume 37, Issue 4