Role of MSMEs in enterprise competitiveness

Enterprise competitiveness is the ability of a business to compete successfully in the market and obtain economic benefits relative to competitors. An economy’s product competitiveness stems from companies within that nation. enterprises produce products and provide services.

There are several features of competitiveness at the enterprise level. A company's products and services must have characteristics that make them attractive for potential customers and convince them in their buying decision. This attractiveness can be due to low prices and differentiation. Differentiation can be achieved in many ways, e.g. through design, quality, additional services and innovative features. Moreover, the company must produce and deliver profitably, which means that after subtracting costs from incomes, the profit margin has to be sufficiently high to ensure a consistent business. Apart from product competitiveness, a company can also try to become and remain competitive concerning processes in the supply chain management (such as speeding up the distribution of goods to retailers or improving the quality of the inventory control) or the production process.

MSMEs must consider their competitiveness strategy from an enterprise perspective. The process can include improving operations and production at all levels, its organization, facilitating and expanding access to financial resources, developing and expanding skills, pursuing internationalization through exports or overseas investment, and increasing innovation, research and development. MSMEs can mobilise strategies to improve their competitiveness: innovation, induced through knowledge and information technology, can lead to a decrease in production costs; niche strategy in which MSMEs benefit from focusing on the small market segments they serve; networking and clustering in which these small businesses strengthen their competitiveness by establishing links together or with other large enterprises; foreign direct investment and supply chain that permits MSMEs access to technology and new sources of knowledge through their linkages with large international businesses.184


184 Harvie, C. (2006). SMEs and Economic Development - Role, Contribution and Policy Issues. Presented at the Young Leaders Training Program for Sustainable Development in Asia and the Pacific.