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. Last Updated: 07/27/2016

Battling to Keep the Soul of the Mid-Size Enterprise Intact

Movements in trade and the ability to enter new high-growth markets in the world economy are catapulting small and mid-size enterprises (SMEs) into a new league of competitors. Competing in more countries against large companies, mid-size businesses are finding globalization cuts both ways -- for each new opportunity there is a new challenge.

Mid-size businesses not only have to deal with increasing M&A activity, enabling larger, more-powerful rivals to push out smaller players, but an operating environment that is characterized by greater customer demands and increased price competition.

The "make-it-or-break-it" challenge for agile mid-size enterprises on such markets is to come up with expansion strategies that allow them to increase profitability without losing their mid-size enterprise characteristics. A new Economist Intelligence Unit (EIU) survey found that mid-size enterprises in Europe fear that the characteristics that made them successful in the first place will erode as they grow into larger entities. These include the ability to change strategy quickly (42 percent), deeper customer relationships (36 percent) and sustaining innovation (20 percent).

This challenge is supported by business visionary Peter Drucker, who writes in "The Theory of Business" that most issues businesses face as they grow are a result of the fact that "the assumptions on which the organization has been built and is being run no longer fit reality." These assumptions involve markets, customers, competitors, technology and a company's own strengths and weaknesses.

The most widely cited "weapons" brandished by SMEs in Europe against larger enterprises, according to the EIU study, are adaptability (51 percent), customer intimacy (46 percent), better pricing flexibility (41 percent), deeper knowledge of local market conditions and specialization in high quality of products and services (40 percent) and lower operational costs (36 percent).

Growth and expansion can strain systems, operating assumptions and the ability to react quickly to market changes. Keeping up with the operational growth of a business is one of the most significant variables for SMEs.

Too much growth, too fast, poses major challenges in creating and sustaining competitive advantages. Thus, a top priority is to define an optimal growth rate to balance expansion with customer needs.

At a time when speed is of essence, 42 percent of respondents in the EIU study said that the ability to execute strategy quickly is the attribute most likely to weaken as they grow. But speed and flexibility don't need to be sacrificed.

To achieve optimal growth, these companies need a cost-effective integrated and flexible IT platform to swiftly support changing business priorities, and track and align growth with operational efficiency. With the right IT solutions in place, SMEs will be able to maintain their unique advantages over larger competitors, and level the playing field as they compete in more markets.

Parrot is an example of how IT has enabled a company to grow at an aggressive speed but still have an integrated overview of the different parts of its business with an excellent cost-performance ratio. SAP Business One has allowed Parrot, a company that has grown from having just 20 employees in 2001 to having subsidiaries in four European countries, the United States and China, to connect operations throughout the company network with transparent lines of communication.

Globe Diffusion, set up in 2002, now with a network of 9 subsidiaries in France and a workforce of 230 employees nationwide, deployed SAP Business One in October 2005 to support the company's international growth. The solution allows the company to monitor activity and effectively manage customer information -- an essential part of its business.

Muntons, a malt and malted ingredients supplier for the world's food and drinks industry, seeking to evolve from a traditional manufacturer into a customer driven business, understood that the supply chain would be key in achieving its goals. With SAP All-in-One, Muntons has integrated its different divisions and has seen a marked improvement over the last three years, with a big increase in deliveries made on time and in full. Within a year, Muntons reduced its day sales outstanding from 55 to 42, saving the company ?2 million. As for our projects in Russia, Salonnaja Kosmetika, a professional cosmetics producer and provider of training for cosmetologists, has used SAP Business One to both expand and retain its leading position on the market.

The GIFTEK Company, founded in Moscow in 1997, provides the newest technologies and materials to the outdoor and indoor advertising market, as well as to industrial enterprises. With SAP Business One, the company now has an effective tool to handle financial transactions, supervise costs, optimize document circulation, and also create a uniform information input procedure to avoid mistakes.

Vodyanoy Company, specializing in the installation of water and heat supply and preparation systems, was established in 1997 in Perm. With the deployment of SAP Business One, the company eliminated obstacles to the growth and further development of the company's business. Problems related to managing internal business processes were solved, enabling the company to focus on customer relations, the quality of servicing and expansion of its customer base.

These are just a few examples that demonstrate that access to and adoption of IT infrastructure and tools that earlier generations lacked mean that mid-size enterprises no longer have to compromise.

So is there a new paradigm for SMEs as globalization aggressively runs its course? A whole new world of business is opening up and information technology is the transformative business equalizer. CEOs from mid-size companies clearly view IT as an ultra-necessity to foster growth, sharpen their competitive edge by enabling new business models, nurture customer intimacy, enhance supplier relationships and integrate with the ecosystem of customers, suppliers and partners.

Research shows that seven out of 10 SMEs in Europe see IT closely aligned with business strategy, compared with eight out of 10 in the United States. Europe is catching up fast and to a large extent this is being driven by mid-market companies. But these pragmatic leaders are -- quite rightly -- demanding when it comes to hardware and software purchases.

In the age of globalization, mid-size companies want collaborative business process platforms that will enable them to track and align growth with operational efficiency and remain flexible and responsive, so that speed and greater adaptability remain their competitive edge.

It was Plato who said, "the soul of a man is immortal and imperishable." With the leverage of IT to manage growth effectively in an era of globalization, perhaps the same thing can be said for SMEs.