The success of a Small, Medium Enterprise (SME) is often dependent on gaining a competitive advantage in a saturated market place whilst being confronted with a plethora of regulation and legislation.
The difficulty for many SMEs is that they do not have sufficient resources either human or financial, to deal adequately with all the demands placed upon them. This often serves as a limitation on the ability of the business to grow its turnover and profits.
Many SME owners would accept that the operating environment is challenging and growth can be difficult to manage. But time and resource limitations prevent an effective analysis of the inefficiencies and hurdles to SME growth and continuing success.
SMEs traditionally look to exploit a range of opportunities, utilising their inherent flexibility to capture competitive advantage in their chosen marketplace. Larger organisations operate less flexibly, yielding immediate competitive advantage to independent firms. However larger companies have economies of scale and can drive down costs in a bid to compete.
In the current environment, SMEs must face the full force of legislation, regulation and market expectations. Although some exemptions are in place for smaller businesses, generally they compete on similar bases to larger organisations.
Additionally many businesses, whose existing or potential customer profile includes for example, larger enterprises or the public sector, are finding that they are expected to be able to demonstrate that they have adopted business continuity strategies to ensure supply chain continuity.
As a result, SMEs are forced to find ways of improving their operational efficiency so as to extract every possible saving enabling them to produce their goods or services on cost effective terms. They need to challenge themselves to build a business strategy that constantly evolves to facilitate the competitive advantage they require to maintain their market position.
To do this requires a thorough understanding of the risks they face and many questions to be asked for example, “could our IT systems fail?” or “are we innovative enough in the development of our product / service range?”
Examples of the many financial, operational, strategic and hazard risks facing an SME are as follows:
IT Systems failure / telecommunications failure / utility outage
Fire / explosion / flood / high winds / site access denial
Environmental failings / health scare / terrorist attack
Loss of key staff / staff misconduct / industrial action
Employee litigation / Health & Safety failures
Negligence claims / other litigation
Loss of reputation or brand image
Inadequate insurance cover
End of product life span / technological change
Customer default / supply chain failure / product failure
Loss arising from a poor strategic business decision
Fraud / financial irregularity
Significant bad debt / cash flow weakness / insolvency
Death or serious illness of owners / senior management
Lifestyle issues / divorce |