Linking Strategy, Business Model and Firm Performance: Evidence from Indian SMEs

Abstract

Indian small and medium enterprises (SME) operate in a hyper-competitive environment serving price-sensitive customers. To survive and prosper, they rely on low-cost strategy and business model (BM) efficiency, less frequently associated with SMEs, but critical to SMEs operating in developing countries. In this study, we explore the impact of low-cost strategy on SMEs’ business model (BM) efficiency and examine the mediating effect of BM efficiency between the low-cost strategy and SME performance across mature and young SMEs. Using data from 194 Indian SMEs, our findings indicate that low-cost strategy drives BM efficiency and BM efficiency positively mediates the relationship between low-cost strategy and SME performance among mature SMEs. However, younger SMEs do not benefit significantly from low-cost strategy and BM efficiency. Finally, we discuss the theoretical and practical implications of our study.