Hong Kong Manufacturing SMEs: Preparing for the Future

108• Anticipate developments within customercompaniesUnderstanding customers and their requirementsprovides an early warning system for newgenerations of products, new market initiatives,or new technology introductions by customers.Staying ahead of the curve could allow forexpanded business opportunities.• Reassess the attractiveness of customersMany SMEs hang onto unprofitable customersthat drain the SME’s resources and distract themfrom taking advantage of other opportunities.S M E s s h o u l d p e r i o d i c a l l y r e a s s e s s t h eattractiveness of their customers and take stepsto focus on the profitable customers.Understanding competitorsSMEs often do not have the resources to undertakedetailed competitor analysis. Even if this is thecase, it is essential that SMEs understand theircompetitors well enough to be able to developstrategies to beat them in the marketplace:• Learn about competitors from multiplesourcesSMEs should try to learn what they can aboutcompetitors from customers, suppliers, industryexperts, and publicly available informationsources.• Assess the different types of competitorsH o n g K o n g m a n u f a c t u r i n g S M E s f a c ecompetition from firms from the ChineseMainland, Taiwan, Japan, Korea, South Asia,and Southeast Asia, and from other Hong Kongfirms. These different types of firms all havetheir own sets of competitive advantages anddisadvantages.• Reverse engineer competitor strategiesFirms should try to understand the competitors’strategies in some details, particularly withrespect to target markets, advantages anddisadvantages, and intended competitivepositions.• Reverse engineer competitor cost positionsMany Hong Kong SMEs believe their Mainlandcompetitors have a significant cost advantage,but few have actually estimated the magnitudeof this potential advantage and therefore whatactual costs competitors may have.• Track competitor initiatives and buildcompetitor profilesTracking important initiatives by competitorsallows the firm to better understand competitors’strategies, trajectories, strengths, weaknesses,and any creative steps they take. A competitordatabase can be kept to organise information oncompetitors.• Do not underestimate competitorsSMEs often underestimate their competitorsand tend to believe that competitors have unfairadvantages. Competitors are usually smarter thanmost managers give them credit for and whileunfair advantages are often a fact of life that justhas to be dealt with, SME managers all over theworld tend to overstate the unfair advantages oftheir competitors.Developing Clear Competitive AdvantagesSMEs often do not have a strategy to develop clearcompetitive advantages. Beating the competitionrequires the development of clear competitiveadvantages. The key is that the firm needs toidentify, create, and leverage advantages if it isgoing to succeed. These advantages can come fromseveral sources: