Turbulent times: Five strategies start-ups can use to take on giants

NAIROBI, KENYA: For the last two years, Hellen (not her real name) has been a small manufacturer of tissue paper, taking on such giants as the Chandaria Industries. It has been tough.

In turbulent times, big ships are more likely to weather the storm than small canoes that can easily capsize. And this is exactly what is currently happening to Hellen's business at this time when supermarkets such as Uchumi and Nakumatt are not paying suppliers.

While Hellen's business is hurting, most of her competitors look as though they have barely been dented by this crisis. And yet Hellen's business is supposed to compete with such a giant.

Even before they compete against giants, small businesses have this small headache of finding a market, or just getting known that you exist.

A research done by the Kenya National Bureau of Statistics found that stiff competition is killing most of Micro, Small and Medium Enterprises (MSMEs). Most, said the national statistician, sought Government help in promoting their products and ensuring that there is fair competition.

"On average,18.3 per cent and 11.7 per cent indicated that the problems in the sector could be solved by assisting in market promotions and in providing an enabling environment for fair competition," read the report.

But, perhaps before small businesses ask for Government help in ensuring fair competition, they need to have some strategies that would help them survive competition.
The Golden rule when competing against giants: You can't beat them in their own turf, so don't take them on.

Here are five strategies small businesses can use to take on giants

1. Use the Shaka Zulu Strategy: University of Nairobi lecturer XN Iraki thinks it is better to attack from the sides when competing with bigger corporations, as Shaka Zulu did. Even worse, is trying to fight them on price, and Hellen knows better.

"You cannot fight them on price, because they enjoy the economies of scale. Even if they were to reduce the price of every unit of tissue they sell by two shillings it would not hurt them," says Hellen.
Several cases come to mind. Today, the seemingly insurmountable large players in the milk sector are being given a run for their money by, yes, small milk vendors. Only this time, the small vendors have been innovative and are selling their milk using milk ATMs. This way, they have been able to price their milk affordably by getting rid of the packaging and branding expenses.

In the diaper business, is common knowledge that unlike before when Pampers was synonymous with diapers, today there are different brands of diapers that are doing well in the market. "Take diapers, for example," says Iraki. "What would make your diaper different from the current ones? Talk to the users! It might be selling in smaller quantities," adds Iraki.
Selling Tissue is smaller quantities, kadogo-economy style, is what Hellen is another strategy Hellen is looking to utilize.

2. Look for neglected markets: When phone manufacturer Tecno Mobile dived into the business of making smartphones, there were already a few established giants- Apple and Samsung ran the show. Even more, developed markets such as Europe, North America and even Tecno's home-market China were all out of reach having been over-run by the two giants.
Moreover, because Tecno was just starting, it was not going to manufacture as sophisticated phones with elaborate features as Samsung Galaxy and iPhones. Africa and South Asian were the best place to start for Tecno. Here they would sell affordable smartphones, to those who, they believed at first, just wanted to communicate.
In 2008, after a market research, the company which had started making in-roads into Africa using its second brand known as Itel, shifted its attention completely on Africa. At first, the mobile maker's strategy was to come up with "low-cost mobile devices that could solve communication problems across the continent," according to Stephen Ha, General Manager of TECNO Mobile. Indeed, the more they interacted with African consumers in different parts of the continent the more they realized that they had nuanced tastes, and were not necessarily looking for gadget with which to communicate.
Stephen Ha told Forbes Magazine that what consumers in West Africa, especially Nigeria, wanted in a mobile phone, was different from what a Kenyan consumer wanted. A Nigerian consumer wanted a phone with a longer battery life- thanks to their "inherent power supply issues." On the other end, in Kenya, "people don't exactly have this problem because there is frequent power."
"But the feedback we got from our customers in Kenya and elsewhere in the region was that they wanted phones with better picture quality, and so we worked on that," Ha told Forbes Magazine.
Since 2006, when it launched in Africa, it has sold over 45 million mobile phones.
Small businesses that are starting can borrow something from this. They do not have to go where big businesses are. Iraki thinks one of the neglected areas to get into is the remote areas. Slums are the other areas. Hellen would like to take her kadogo tissue into Nairobi slums.
3. Partner with the larger company or become a subcontractor: Rather than working against them, you can work with or for them. Large companies have bigger and better supply chains which you can take advantage. Most small businesses might have a better product but just don't know how and where to sell them. "Identify what your company can bring to the relationship that increases the success of both entities," said the founding and former executive director of the Center for Women's Business Research, Sharon Hadary.
Hadary told the Wall Street Journal that competition with a large company can be the impetus for creating strategic alliances with other small businesses to expand the range of products and services you can offer and bid projects as a team. So, "why not be their partner e.g. as a distributor and learn from them?" Iraki wonders.
4. Use your advantage of small size: Flexibility: Because you are small, you are agile. You can change as fast the trend changes. That is an advantage that big companies do not enjoy. Even the smallest change in a large corporation has to through an elaborate process before it is approved. The idea is then subjected to rigorous research and design with the company pouring millions of shillings on the R&D. All this has to pass through a whole lot of middle men before it is approved. Most corporations look at all this, and decide not bulge.
A small business, on the other hand, does not have much to lose. All they want is to increase their sales. And because they are constantly in the field, interacting with customers and getting to know their tastes and preferences as it changes, it is easier for to switch. Change as fast as your customer changes, you need no one's permission.

5. Push for better regulation: Sometimes, there are laws, regulations that simply makes it hard for a small business to operate and easier for bigger corporations. For example, too much paperwork on filing of taxes is an area that most small businesses have complained about. Moreover, the numerous taxes have just hampered operation of most small businesses. That is why Hellen thinks that the Kenya Revenue Authority (KRA) is a "monster." Most big corporations would have it easy because they can easily employ the services of a tax expert to do this for them. The done by the Kenya National Bureau of Statistics revealed that the main constraints for small businesses emanate from "regulatory environment characterized by requirement of multiple licenses for the same business."
The respondents noted that these licenses were also expensive and cumbersome to get. "There is also interference from authorities; taxes are high and crippling; multiple procedures in applying for business registration that are hectic and restrictive," read part of the report.
As a player in the small business, you might also have to work the right player to ensure that access to capital is easy, there is sufficient infrastructure, there is little insecurity and market is easily available.
You can also join those pushing for Government to protect local infant industries, against undue competition from big foreign multinational corporations. However, this should not give you the license to be complacent.