What competition would mean for MSMEs at COVID-19 times?
What competition would mean for MSMEs at COVID-19 times?
Sayyed Hasan

The economic crisis in the wake of the pandemic is changing the business landscape — raising concern about the state of competition in the market. Under normal circumstances, healthy competition in the markets ensures low prices and multiple options for the consumer. However, COVID-19 crisis has created havoc on markets worldwide. The worsening economic conditions would lead many firms to exit the market and also limit the number of new entrants impacting market competition severely. The unprecedented economic impact of the pandemic has left the governments balancing between defending the competition and at the same time relaxing competition rules to ensure the survival of companies. The relaxation of competition rules will help large corporates to collaborate. This will eliminate small and medium players from the market.

Large and big corporates will consolidate their position in the market thereby increasing their market share. It would be extremely difficult for small and medium entities to fight big companies on the one hand and the pandemic on the other. Big companies swallowing struggling small competitors would have a devastating impact on the economy and job creation. Governments should be vigilant enough to take anti-competition action on big companies on a case to case basis.

To tackle competition from large corporates, MSME should up their game to the changing business environment.

Way forward for MSMEs

Putting a united front: MSME is the growth engine of any economy. MSME in India is the largest employment generator. Any severe impact on MSME will have a disastrous impact on the job generation ability of the country. MSME from different sector should put a united front before the government of India asking for relief from various compliance, easy access to relief packages and bargaining for more measures to be taken to support MSMEs. A united MSME sector can bargain for better prices from large corporates and also reduce the number of days of sales outstanding, this will reduce the need for working capital and reduce the cost of product and services.

Increasing competitiveness of MSME: Majority of our MSMEs are micro-units, this led to inefficiency and reduces the competitive edge at the global stage. Our focus should be on policies that incentivise the sharing of resources among MSMEs. Shared economies will reduce the cost drastically and also utilise unused capacities efficiently. A fairly large MSME will have the capability to invest in people (improve skills), invest in advance technologies and support research and development activities. Investing in people, technology and R&D will raise MSME’s stature at the global level

Collaborations among one another: Collaborations and partnerships between MSMEs and start-ups are the way forward for the industry to fight it out and emerge stronger amid the Coronavirus outbreak. Innovation and striking synergies among MSMEs will make them go a very long distance. Disruptive ideas and execution skills will result in new lines of business thereby reinventing the entire business ecosystem. The collaboration of different segments of MSME based on their expertise for providing an end-to-end solution to customers will attract customers and will also be able to generate good prices for products and services.

Embracing Digital Technology: MSME should actively participate and lead the digital transformation especially during COVID 19 times. Digital technology will widen the net for the MSME for identifying and acquiring new clients. It will also help them to serve their existing client efficiently and effectively resulting in higher customer satisfaction. Small business will be able to retain more customers with digital tools.

Tackling Supply chain disruptions: Due to pandemic and consolidation of position by large companies, it won’t be easy for MSME’s to procure raw material. Many firms may have halted their operation for some time, this will lead to price surge by other companies. MSMEs should search for alternative sources of raw material within and outside the country to avoid paying high prices caused by supply chain shock and also to ensure a continuous supply of product and services to its customers.

In conclusion, MSME firms should come together to compete with large corporates and multinational companies, it should also bargain with the government for additional measures to support the engine of our economy.

(Inputs by CA Abhay Nair)

Dr Menon is a business coach and has a youtube channel menonmantras. Write to him at anilrmenon1@gmail.com.)

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