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 Whether it's emerging economies such as China, a shrinking labour pool or the dizzying speed of technological change, SMEs today must compete in a whole different way.
Globalization has created real interdependence among companies," says Jérôme Nycz, Vice President, Strategy and Planning at BDC. "There was a time when businesses simply competed with one another and each firm might have controlled its entire production process. However, companies now are more horizontally integrated and rely on each other as suppliers or may even be each others' customers. In turn, this means that businesses now have an invisible competitor in the global market - the supply chain," he emphasizes.
"Supply chain management involves a complex flow of information, internal and external suppliers, production, distributors and customers. Your success today can be determined by how well you perform in any one step in the process," he explains. For example, an entrepreneur could be faced with the reality that their company can no longer compete on price alone. After all, their products could now be produced for cheaper abroad. "To sharpen its competitive edge, this same company might have to consider outsourcing some of its manufacturing overseas at a lower cost and investing more in product innovation and market development here," he says.
Differentiate your business
For Nycz, the best ammunition to compete is to ensure that your company defines its "value proposition". Put simply, your value proposition is how you intend to differentiate yourself in the market. "No longer is this limited to your company's tangible assets such as your production line," he emphasizes. "Entrepreneurs need to invest in intangible assets such as knowledge, people skills and innovation, which have a high competitive value today."
"When pinpointing ways to improve your value proposition, it helps to view your business from 5 different axes - R&D and innovation, human resources, supply, production and marketing & sales," suggests Nycz.
He offers readers some helpful strategic planning advice in each of these key areas:
R&D and innovation
Always make sure your products evolve to meet current market needs by investing in R&D.
Protect your intangible assets such as intellectual property and know the Canadian and targeted market patent protection systems.
Make innovation scalable. Invest in equipment and technology to improve your operational processes such as ERP, which helps integrate all of your systems. Implementation of accounting systems, customer relationship management, Web 2.0 and database management can improve your productivity, which in turn puts you ahead of your competitors.
Encourage an innovative mindset in your company geared to customer needs.
Take full advantage of available tax credits such as SR&ED.
HR
- Invest in your intangible assets such as people skills through increased training; your company's knowledge will help you stand out in the crowd.
- Use your HR creatively. For example, leverage the web acumen of junior employees and send them abroad to validate results. Also, leverage today's highly diverse workforce who can be instrumental in creating ties with specific markets.
Supply
- Get connected to your supplier and clients. This will help you be more agile in your production.
- Form strategic partnerships with suppliers that enable you to extend your reach and achieve economies of scale: this could enable you to be more cost-effective. Use the services of logistic experts.
- Consider redundancy in suppliers, which may cost more but will diminish vulnerability to one specific supplier who could become your next competitor.
- Remember that a weak link in your supply chain could make or break your competitiveness.
Production
- Develop and produce hard-to-copy niche and specialty products that differentiate your business.
- Reduce your company's delivery lead-time by improving your processes. Install procurement software or a Just-in-Time system to manage your supply.
- Invest in the right equipment and technology to help reduce the risk of costly errors and waste; better quality means you stand out.
- Focus on improving your operational efficiency. Implement a continuous improvement approach that ensures that your company is not stagnant; an innovative company shines out there.
Marketing and sales
- Be systematic about your marketing; random efforts tend to have little sizzle. Invest in a marketing plan.
- Improve your branding so that you can differentiate yourself in a crowded market.
- Make market research a permanent activity.
- Customize your products and services to the needs of those markets. Differentiate yourself from your competitor and create a hard-to-copy product or service.
- Be aware of certification requirements of your potential clients and take necessary steps to qualify.
- In some regions of the world, the trust factor is an integral part of doing business. Don't under-estimate the value and required time and energy needed to establish a trusted relationship.
- Stay close to your clients. Train your salespeople to understand your products and customer needs. Insist on their input on product development. Create a culture of "after sales services."
- Make full use of online bidding opportunities.
- Co-develop alliances with larger businesses that can provide support with market opportunities and the distribution of your products.
For entrepreneurs looking for external help, BDC Consulting offers affordable and quality consulting advice. Areas of expertise include strategic planning, which can help businesses assess their strengths and weaknesses to help them compete. As well, BDC can provide sound research for export markets and operational efficiency planning to improve productivity and stay lean.
On the human resources front, companies can also seek counsel on how to hire and retain the best people in a shrinking labour market. "External counsel can help your business sidestep the threats of globalization and embrace the opportunities," concludes Nycz.
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