SMEs in the Contemporary Era of Global Competition

Abstract The evolution of globalization has provided a vast array of opportunities to the whole world. Companies have moved across the boundaries to take advantage of wider customer base. While exploring benefits of globalization and moving across boundaries, these giant multinational companies often pose a serious threat to the local companies of the host country by intensifying the competition for them. Especially the SMEs of less developed countries are more vulnerable because of their limited investment, already insufficient to remain competitive in the market. The establishment of stable and prosperous SME sector ensures the economic success of a country. Most of the developing economies are pursuing their growth by stabilizing their SME sector. These developing countries with gradually increasing purchasing power parity due to their economic growth are also a charm for the MNCs. These MNCs along with their huge resources, technological expertise and already achieved economies play a dominating role and evacuate the markets of local SMEs by their cost leadership strategy resulting in destruction of local industrial base and consequently the economic growth of the country. The paper indicates the negative effects of the MNCs on the growth of local industry thus providing a framework to the policy makers to devise policies safeguarding their local companies. The research also aims to facilitate local small scale entrepreneurs to be aware of the possible threats and enabling them to better combat against the giant MNCs.