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SMEs: Lifeblood of the UAE Economy
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SMEs: Lifeblood of the UAE Economy
Date: 06-04-2017

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You could be forgiven for thinking that size is everything in the UAE.

When it comes to business, however, SMEs (small-and-medium sized businesses) remain the lifeblood of the UAE economy, a major source of employment, economic diversification and innovation.There are an estimated 350,000 SMEs operating in the UAE. This represents 94 per cent of the total number of companies registered in the region. SMEs account for 86 per cent of the UAE workforce contributing 60 per cent to national GDP. SMEs are also one of the fastest growing sectors of the economy with estimates suggesting an average growth rate of 15 per cent per annum in the number of SMEs operating in the UAE.

Speaking at the recent SME World Summit 2017, held in Dubai, His Excellency Abdul Baset Al Janahi, CEO of Dubai SME, stated that: “The small and medium enterprise (SME) sector has been the backbone of our nation’s economy. It promotes employment opportunities, drives the economic growth of the nation, stimulates the latent entrepreneurial talent in the society and spawns a circle of innovation for a better and sustainable future.” 

With this in mind, a range of SME support policies and practices have been introduced to support the further growth of SMEs, to boost their share of GDP from 60 to 70 per cent by 2021.

Barriers to growth

While these measures are very much to be welcomed, small-and-medium sized business still face a number of barriers and obstacles to growth, especially when trying to win business from much larger organisations, e.g. centralised procurement policies favouring suppliers with global reach, attitudes towards risk, financial strength and so on.

In terms of an SME being able to enter and compete in a market segment deemed to be the domain of bigger multinational companies, the intensity of the competition is determined by the industrial rivalry, the bargaining power of buyers, the bargaining power of the supplier (the bigger company) and the absolute cost advantagethey may have. These potential barriers can and do act as a deterrent against SME’s bidding for business. The SME must know when to compete and when not to enter into a market where time and money could be wasted. 

To better understand where the opportunities may lie, SMEs need to understand the barriers to market entry that exist. These include: economy of scale benefits of large organisations; the incumbent supplier may have brand loyalty; overcoming the costs and inertia associated with change; government policy e.g. licensing requirements; and so on.

It is important to understand the expected reaction towards the SME as a potential new supplier. Building trust in your capabilities is critical. It is also important to know when not to compete. Winning the business regardless of commercial viability should not be an option. After all, you cannot put revenues in the bank…only profits.

Benefits of working with SMEs

With SMEs being the backbone of the rapidly growing UAE economy, more can always be done to promote the benefits of working with small businesses. Big is not always best. In many instances, smaller businesses can present unique advantages over larger competitors.

Compared to bigger competitors, SMEs can often deliver tighter control over their output and interaction with customers. Due to their smaller size, they can be more agile and flexible in responding to specific customer needs, rectifying problems before they become a crisis. In many of the sectors we operate in, for example, commercial laundry and in-flight catering, speed and flexibility of response is critical.

The importance of the personal touch and personal relationships should never be underestimated. Small business owners and senior managers will be much more directly involved in employee and customer communications compared to much larger, more bureaucratic organisation. This will, more often than not, lead to much higher levels of employee engagement and customer satisfaction. It can often take a much larger competitor months or longer to even become aware that a problem exists, by which point it may have escalated out of proportion.

It is very difficult for big business to replicate the intimate, one-to-one, personal relationshipsand mutual trust that smaller businesses have with their key customers. At Arpal Gulf, we pride ourselves on the quality of customer service we provide. Our mission is to never give a customer a reason for going elsewhere.

Over the next three follow-up blog posts, we will explore in more detail the benefits of working with SMEs, ‘walking-the-walk’ not just ‘talking-the-talk’ in customer service and how SMEs can make effective use of emerging technologies to establish a level playing field with much larger competitors.

Contact details:  
Tel: 800 4005 (Toll Free within UAE) | +971-4-880 3220  
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