Page last updated at 17:11 GMT, Sunday, 28 February 2010

Small firms taking on the global giants

By Will Smale
Business reporter, BBC News

Kromek airport bottle scanner
Kromek's equipment is installed at airports around the world

In the continuing fight against terrorism, it may come as a surprise that a small British firm with just 45 members of staff is at the vanguard of tightening security in the global airline sector.

The company in question is County Durham-based Kromek, which develops and makes the latest generation of full-colour, 3D, X-ray machines.

Installed at a growing number of airports around the world, its equipment is used to check your luggage before it goes on the plane.

One of its best-selling products is a machine that, in under 30 seconds, can check whether a container of liquid is exactly what the passenger says it is.

If it contains hazardous substances or drugs, then the machine quickly lets the operator know.

If you are running a small firm be nimble - think what you can offer that the multinationals can't
Business start-up expert Doug Richard

In an industry dominated by the giant global defence and security companies, Kromek is proving that it is possible for a very small firm to punch well above its weight.

But for other small companies wishing to compete against the multinationals, what is the best way to be David to their Goliath in the cut and thrust of business?

'Faster response'

"One of the primary strengths small firms bring is agility, the speed at which we can innovate," says Kromek chief executive Arnab Basu, the current Ernst & Young UK young entrepreneur of the year.

Kromek chief executive Arnab Basu
Mr Basu says small firms can innovate quicker than large ones

"The multinationals by contrast are a lot slower to release new technology.

"They generally have roadmaps set out with very small incremental product improvements.

"By contrast, a small firm like ours can make big step changes to put ourselves at the technical cutting edge. This is the key way in which we can compete, and as a result we are very disruptive to the big firms.

"Because of their much stronger economies of scale we can't compete on price. But when you are at the leading edge of technology, you are generally protected against that issue - customers don't buy your products because you are the cheapest."

'Closer to customers'

Entrepreneurship expert and former Dragons Den panel member Doug Richard goes even further, saying it is "crazy" for small firms to try to complete with larger companies on price.

"Cheap pricing is the last refuge of competition," says Mr Richard, who runs the School for Startups business advice service in association with telecoms group 02.

"For small firms, whether they sell a product or a service, it should be nothing about competing via low prices.

"Instead the key advantage for a successful small firm is the ability to get closer to the needs of its customers. If you are in this position, then your customer will happily pay more for what you offer.

"By contrast, large companies - by their very nature - release products of a far more general, but less specific, appeal. Small firms can, and should, get much closer to exactly what their customers need."

'Be different'

For Simon Duffy, co-founder of male grooming products company Bulldog, being markedly different to its main competitors - global giants L'Oreal, Gillette and Nivea - is the secret of its success.

Simon Duffy
Mr Duffy and his team came up with an internet advertising campaign

Founded in London in 2007, and still with just six members of staff, Bulldog now supplies Sainsbury's, Waitrose, Boots, Superdrug and Tesco.

"There was no way we could compete on price, we would have always lost that one," he says.

"Instead we knew something different had to shine through."

So instead of using generic skincare product formulas, Bulldog developed its own recipes using all natural, fair trade ingredients.

Only then it had the problem of how to attract customers.

"The industry we are in is also very advertisement based, with our rivals spending millions and millions on TV and magazine adverts," adds Mr Duffy.

"We obviously couldn't afford to do a fraction of that, so instead decided to look at the potential of the internet."

As a result, Bulldog teamed up with comedian David Mitchell to sponsor a series of comedy monologues that were released onto the internet for free.

"It worked really, really well," said Mr Duffy. "We gave David complete editorial control to talk about anything he wanted to, with some very discrete Bulldog advertising at the start and the end.

"And we had close to three million viewers, with people either downloading the clips, or e-mailing links to their friends."

While most small firms are unlikely to join with comedians, it is such innovative thinking that can help small firms succeed.

"If you are running a small firm be nimble," says Mr Richard. "Think what you can offer that the multinationals can't."



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