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What are the Strengths and Weaknesses of a Smaller Company?

Guest post by: Stan Prokop

Article Overview: The article provides insights as to how business owners and new entrepreneurs can focus on competing with larger firms who have significant perceived advantages in the marketplace . Small and medium sized firms have advantages also .

What are the Strengths and Weaknesses of a Smaller Company?

Business owners often hear the business fact that small and medium enterprises are in fact the largest employer and the true 'engine 'of the economy. It is also reasonable to assume that many business owners and the management of smaller and medium size firms worry about competing against the big global giants. These larger competitors in many cases have 'brands ', as well as unlimited financial strength.

However, do business owners really know what those competing challenges are and how they can focus in on addressing them in some manner?

As mentioned previously financial strength of big firms and financial limitations of smaller firms is certainly a key area. Small and medium sized firms continually focus on cash flow and are challenged by working capital. The banks and larger financial institutions can be forgiven for wanting to lend more to larger corporations, since their loans are safer and more collateralized. The small firm can't fact financing their customers in the manner that larger corporations can. The large corporations even usual financial strength to further compete against product and price by offering financing arrangements via their captive finance companies - think IBM CREDIT CORP as an example, or Caterpillar Finance. Just some examples.

Smaller firms are also challenged by personnel issues; they have trouble retaining key successful employees around issues such as compensation and benefits. Owners are focusing on day to day problems and challenges, and can't always think long term in areas of employee development, etc.

Naturally smaller firms pay more in direct costs because they don't have buying power; as well they are often focused on a couple core products and competencies. Larger corporations can diversify geographically and product wise as we know.

Intuitively the consumer or business customer gravitates towards a larger corporation for products and services, if only for the perceived safety and warranty issues.

Well, we have seen areas where the big guys clobber the small guy. Let's turn the boat around!

Service/Service/Service - have we made out point?! Value add in smaller firms is often service and support. Customers want the personal touch and they clearly get that from a smaller firm.

Also, in a smaller firm, in general the business owner is very focused on working harder and longer with their customers - big corporations tend to favor broad stockholder approval.

The smaller firm is also more adept, and can move more quickly to adapt to market needs. Big companies can take a long time to react to competitive change. Communication and market needs are very focused in a small company - it might take days, weeks, years for larger corporations to implement major market changes.

Customers and consumers hate bureaucracy, and smaller firms certainly have less of that - decisions are made easier, customer situations are rectified more quickly.

In summary, business owners often have a fear of the 'gorilla 'in their industry - the big corporate giant with brand and financial clout. Instead they should focus on specialized market segments, localization of their services, personal service, etc.

It doesn't hurt to be a small /medium sized firm if we do it right!

.

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Article Tags: competition, smaller company, strengths and weaknesses



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