How Small Businesses Compete with Large Corporations

As a Student interested in business, it is quite interesting to learn about the competitive advantage of SMEs over larger companies. Although they lack significant resources, SMEs can still use a certain strategy to stay ahead. Based on my understanding of various business concepts, I have tried to explore how SMEs manage their differentiation and pricing issues in order to sustain their existence.

Porter's Generic Strategy theory suggests that small firms usually apply differentiation or focusing strategies rather than cost leadership because they provide added value in their own ways. For instance, SMEs maintain customer relationships by offering personalized services as well as products. When it comes to pricing, SMEs tend to apply value-based pricing in order to offer their goods for higher prices despite high costs of production. Also, SMEs are able to practice dynamic pricing in response to changing market conditions. In addition, SWOT analysis allows SMEs to capitalize on their strengths (flexibility and customer intimacy), among others.

In summary, SMEs succeed in competing through differentiation, specialization, and flexible pricing. As evident from business models, their flexibility and ability to be customer focused help compensate for any disadvantages. The discussion above has made me more aware that being strategic is more important than being big.