Are SMEs less competitive than their larger counterparts?

Fifty two per cent of private sector businesses believe that SME suppliers are less competitive than their larger counterparts, according to new research from BT Business and Cisco. The research, developed to explore the factors influencing large businesses in choosing suppliers, shows that the same proportion of large businesses are more demanding of suppliers than they were a year ago.

On a positive note, procurement managers are aware of the benefits of working with a smaller business. The vast majority (72 per cent) believe small businesses are well placed to offer a more personalised service than their larger competitor, with customer service and responsiveness cited in the top five reasons to award contracts.

Although 87 per cent say small businesses are more likely to have the personal chemistry conducive to a smooth supplier relationship, 57 per cent say they do not believe SMEs are as able to provide around the clock support, and 52 per cent say they are less able to offer competitive rates.

The bias for larger, established businesses is illustrated by 40 per cent saying they are less likely to choose a small business supplier when times are tough. And 42 per cent would select a larger supplier over a smaller one, believing that big enterprises are a safer option in the long run. It also emerged that 41 per cent think that small firms are less creative.

Procurement managers allocate on average £28 million each year to suppliers, with a sizeable 23 per cent (£6.6 million) spent with small businesses.  Whilst these figures point to a healthy market opportunity for SMEs in the UK, almost half (48 per cent) have increased their payment periods or would consider doing so as a result of the credit crunch. This is despite nearly a quarter (24 per cent) acknowledging that larger companies have a responsibility to consider the impact these terms would have on firms who may struggle to cover their initial costs.

John Dunsmure, managing director, British Chambers of Commerce, said: "These findings are extremely worrying for UK businesses and especially start ups. As such I would urge businesses to outsource anything that is secondary to their core business competence and invest their precious resources in what will help set them apart from the competition."

Bernadette Wightman, director, SMB, Cisco UK & Ireland: "Given the pressure to do more with less, small businesses are being squeezed by the demanding tendering process. Intelligent use of IT alongside wider organisational processes can help SMEs to address these challenges."

Forty per cent of those questioned admitted that what a supplier chooses to outsource is a key factor in their decision making. Just over a quarter (26 per cent) claimed they would prefer to work with a company that does everything in-house, while one in four said they would be concerned if a supplier outsourced its customer service.

Bill Murphy, managing director, BT Business, said: "Good customer service is obviously essential for any business. Having fewer people can mean that it’s much more difficult to respond to customer queries and concerns. But there are ways to overcome this; unified IT and communication systems are now affordable for all, and can provide the tools to help enable SMEs to compete with even the biggest suppliers."

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