Vadim Kotelnikov    

Modern Small and Medium-sized Enterprises (SMEs)

Strengths and Weaknesses of SMEs

   

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Strengths

Weaknesses

More customer focused

Poorer access to finance

More responsive to market needs

Resource constraints

Highly visible top management

Harder to retain a high caliber staff

Low bureaucracy

Lack of skills

Innovativeness

Lower job security

Informal working environment

Less strategic thinking

Quick to seize opportunities

Less strategic planning

Flexibility

Lower standardization

 

 

In today's rapidly changing world, the real force behind the success of rapidly growing innovative SMEs is rooted in their strategic flexibility and ability to adapt. SMEs have far fewer embedded systems and processes that constrain flexibility, impede fast decision-making or slow the speed of experimentation and execution.

In SMEs, the owners and managers are quite often one and the same, resulting in the perfect alignment of decision-making and value innovation. Governance is usually concentrated in one or two people who are very close to the customers, the operations,  and the business environment. This creates rapid feedback loops to the decision-makers.

SMEs tend to have employees with a broad job descriptions and operate in a less structured environment. Employees of rapid growth SMEs ('gazelles') spend less time worrying about process, and more time on getting the job done relative to the employees of large firms that compete in mature markets. As a result, SMEs enjoy a significant advantage in their ability  to evolve rapidly, to react quickly to developments in the marketplace, and to make the necessary changes to their competitive positioning, which, in turn, enhances their competitiveness.

Yet, the lack of formal policies, systems and structures may become a significant drag on operational effectiveness.