Why do small and medium enterprises in the manufacturing sector need to develop strategies?

In the economy of most countries, small and medium-sized enterprises occupy a very important position and role, considered as “engine of job creation”, as the engine of growth. With a small scale and simple organizational structure, these businesses can flexibly adapt to real changes in time. Germany, a country with a number of small and medium enterprises accounting for about 30%, is a typical example. Germany has succeeded in transforming the small- and medium-sized manufacturing sector into the machinery of supplying exports.

Unlike commercial or service enterprises, manufacturing enterprises use resources and production materials in combination with the application of science and technology to create products that meet market demand. Manufacturing businesses that want to operate need large investments in fixed assets such as factories, machines, equipment and technology.

Therefore, if a product is produced but cannot find a consumer market, it will be very difficult to switch to other products. For example, an enterprise that invests in electric fan production cannot immediately switch to water pump production; or enterprises in the textile and garment industry cannot decide to invest in paper production. If the production switch is carried out in a sudden, lack of basic calculation, the consequence is that the entire factory, machinery, equipment and technology can be turned into a pile of scrap. Therefore, it can be said that the first thing that SMEs need to do, before investing capital, is: building a right development strategy, in which the product-market pair is identified. fit.

Through a survey of many small and medium-sized manufacturing enterprises, the Institute for Strategic Leadership Development (SLEADER) found that many business leaders have very good technical expertise, but have not been well trained. about governance. Due to lack of knowledge of corporate governance, as well as lack of thinking and the ability to plan strategies, many small and medium-sized enterprises “plunge” into short-term, temporary business opportunities, do not really pay attention to to build a long-term and sustainable development strategy with clearly defined goals and missions.

This situation was stated by Harvard strategy professor M. Porter when he arrived in Vietnam in 2010: “The success of Vietnamese businesses today is still based on taking advantage of opportunities. In the short term, instead of developing on the basis of sustainable competitive advantages, Vietnamese business leaders need to understand the basic rules of strategy instead of becoming a victim of trendy trends in governance ”. Regarding this situation, it can be seen: the first reason is that the business owner does not fully understand the benefits of the strategy as a sustainable competitive advantage.

Because they have to manage to survive, there are few conditions to exchange and improve their skills, so business owners do not know the three basic benefits that a strategy brings. That is, clear future direction, or in other words, clearly define the destination and path for the business; bases for wisely allocating resources, prioritizing resources for areas to create breakthroughs, reducing resources in areas that are not really necessary; Create trust and cohesion within the enterprise, which will create real strength for the business.

Another reason also contributes to limiting the vision of business owners, that is spontaneous activities, production based on managing situations is still common, if there is profit, then business, seeing products. if you can sell, you will produce. When asking the question: “Why do small and medium enterprises have no strategic direction before doing business?” The answer is often received is: “Due to its small scale and thin capital, there are no conditions to invest in a methodical strategy from the beginning like large enterprises”.

At this point, it is possible to give recommendations for small and medium enterprises in general and in the manufacturing sector in particular: because of the small scale, less capital, the more you have to start with strategic planning to darken. capital optimization, avoiding the investment spread, losing a lot of money without bringing about the desired effect.

[VIDEO] Why do SMEs in the manufacturing sector need to develop strategies?

Dr. Duong Thi Thu, Director of the Institute for Strategic Leadership Development Studies

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