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8 Key Sources of Competitive Advantage for Small and Medium Enterprises (SMEs)

The world’s largest companies started as small businesses and exploited different sources of competitive advantage leading to sustainable growth. The ability of a micro-enterprise to grow into a medium enterprise and eventually a large company depends on how best sources of competitive advantage are utilised.  There are many sources of competitiveness, and it is the manager’s responsibility to monitor the environment to identify these sources.  The leading 8 sources of competitive advantage for SMEs include technology, human resources, culture, quality, capital, customer relations, and strategy.


Technology refers to the skills and tools used for converting inputs into outputs. Businesses are systems created to convert inputs/ resources such as raw materials, labour, and information into outputs such as products, services, profit, and growth.  The long-term success of a business is dependent on the efficiency of the business process in converting inputs into desirable outputs. Technology is a source of competitiveness as it enables a company to realise a higher efficiency converting inputs into desirable outputs. Information communication technology is an important element of technology that SMEs must exploit. In specific, the internet provides valuable communication tools that give small businesses leverage. An SME that seeks to be competitive must have an authoritative website, reputable social media profiles, and relevant information systems to support collaborations with key stakeholders.

Human Resources

People are the most critical assets in an enterprise due to their invaluable contribution to the realisation of organisational goals. Implementing effective human resource strategies gives an SME a competitive edge. Human resource management is concerned with the acquisition and retention of talents.  SMEs that want to acquire competitiveness must establish objective recruitment systems to tap the best talents from the labour market.  Besides recruitment reliable training and development, motivation, and compensation systems are needed to maintain the employees.


A superb corporate culture is a source of competitive advantage for SMEs. Culture refers to behaviours and beliefs that determine how things are done in an organisation.  It influences essential aspects of a business such as interactions with customers, employee relationships, and service quality among other important aspects that determine the competitiveness of a business. It is the business leader’s responsibility to ensure the existence of a strong culture by establishing the ideal value system. A value system is a set of beliefs that define the right behaviour in the work environment that helps the employees to understand the acceptable and unacceptable behaviours.


Quality is central when it comes to creating competitiveness. The long-term success of a business is determined by the level of customer satisfaction. Offering quality products and services that satisfy customers leads to a loyal customer base. Customer loyalty supports market share growth since a business can only expand its market share when customer retention is high.  Offering high quality, therefore, gives an SME a sustainable competitive advantage.


Availability of capital is a key determinant of the growth of an SME.  Growth stems from the timely exploitation of opportunities presented by the environment.  Competing businesses are in a rush to exploit new opportunities implying that cash-starved SMEs lose big due to their inability to grab opportunities.

Customer Relations

Managing relationships with customers is a vital business success factor. Customer relationships management refers to processes and practices employed to govern interactions with actual and potential customers.  It involves establishing communication platforms to support a free flow of information between a business and its customers. SMEs that wish to become competitive must, therefore, emphasise creating customer intimacy.


A corporate strategy is a game plan on how to realise organisational goals.   Establishing an effective strategy requires a detailed environmental analysis to identify the opportunities and threats facing a business. It is also necessary to carry out an internal assessment to identify strengths and weaknesses. The realities of the internal and external environment form the basis for strategy formulation.

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