Abstract
Small and medium enterprises (SMEs), which, over the years, were in charge of supplying goods to rural areas and townships, are fast losing markets to large business. Modern customers want value-for-money through high-quality products at low prices, greater convenience, and a wide range of choices. Large enterprises are capable of meeting these demands. Hence, they have a competitive advantage over the SMEs. In addition, large corporations can deliver the convenience of one-stop-shopping. This paper exposes SMEs options useful for offseting the might of large business. It highlights the available routes for strength creation. One option is to step aside temporarily while running the SMEs, but preparing fully for future competition. Another option is to fill the gaps left by large companies while preparing to contest face-to-face. Recommendations are that SMEs should exploit available empowerment opportunities and, then, use methods of advantage to work in the presence of large businesses. SMEs can delay direct competition until the time is right. Keywords: competition, empowerment, large enterprises, SEDA, SMEs. JEL Classification: D41, D51, D83.
Highlights
Before 1994 in South Africa, rural and township businesses were mostly locally-owned small and medium enterprises (SMEs)
This paper focuses on South African SMEs that are legally registered and intending to contribute to community development and the economy
South Africa has the Small Enterprise Development Agency (SEDA), which is an agency for developing SMEs with regard to any problem or developmental aspect of business (SEDA, 2015)
Summary
SMEs have available options to compete with difficult companies They could follow a niche strategy of differentiation focusing on providing superior customer service, and carrying of merchandise that is difficult to find. According to Billesbach and Walker (2003), large competitors are strong in solid purchasing economies of scale that inhibit SMEs from adopting a competitive strategy of low cost leadership. Several authors (Goedhuys & Sleuwaegen, 2000; Inyang, 2002; Hudson, Smart & Bourne, 2001; Man, Lau & Chan, 2002) attest that most companies that emphasize on customer importance become successful, which was a result derived empirically Another finding by Morris and Gerlich (1995) is that differentiation strategies provide an advantage that lead to business success, where the differentiation is based on customer needs. Taylor and Archer (1994), based upon their experience with over 1000 small businesses, recommended fifteen ways for small businesses to provide superior customer service
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