What is the Strategic Response Adopted by SMES During the COVID-19 Crisis in the UAE? A Case Study of Two Emirati SMES

Abstract

The coronavirus pandemic has triggered an unprecedented economic crisis that is having a drastic negative impact on the financial performance and competitiveness of businesses around the world. Due to COVID-19, the global economy has contracted severely, making it difficult for companies around the world to maintain adequate levels of performance and profitability. SMEs are particularly vulnerable to such disruptions, as their access to finance and human resources is much more limited compared to medium or large companies. However, since SMEs contribute significantly to a country’s gross domestic product (GDP), the threat of coronavirus to their viability poses a significant threat to the economic and social development of their host country. The United Arab Emirates (UAE) experienced the negative economic consequences of COVID-19 with its GDP witnessing a significant decline in 2020. While virtually all Emirati businesses have suffered losses due to COVID-19, small and medium enterprises (SMEs) were particularly vulnerable to the consequences of the pandemic due to their small size and newness. This study aims to find out how Emirati SMEs are strategically responding to the coronavirus crisis and coping with its impact. To achieve this, a case study was conducted on two Emirati SMEs and data from semi-structured interviews and self-administered questionnaires were used. Primary quantitative data were collected from 50 employees of two SMEs operating in the UAE. One company specialized in real estate and maintenance services, and the second was a yacht manufacturing company that also provided maintenance services. In addition, primary qualitative data were collected from 10 managers and owners of these SMEs. Our research found that supply chain disruptions, supplier bankruptcy, limited access to financial resources, demand shortages, and limited field-service activities were among the main challenges faced by the two SMEs during the COVID-19 crisis. The strategic responses that were actively adopted by these SMEs included monitoring the external environment for business opportunities, adjusting supplier management, servitization, and establishing new supply chain links and partnerships. By developing an understanding of the strategic responses of the two SMEs, our research contributed to both theory and practice by applying the concept of crisis management to SMEs facing the COVID-19 crisis, a crisis that can be considered a “black swan” event. By exploring this topic, the research contributes to the existing body of knowledge and to our understanding of how SMEs in a developing economy respond to COVID-19 and how resilient they are to this major crisis.
 Keywords: SMEs, COVID-19, crisis management, strategic responses