Competition and collaboration among MSMEs during times of crisis

Abstract

The focus of the study is on the competition and cooperation that exists between MSME’s and how associations can be leveraged to tackle crisis effectively. In-depth interviews of proprietors from several MSMEs is conducted to understand the bright side and dark side of forming associations among SMEs operating in similar industry. The study is extremely relevant in the current scenario as the recent pandemic had had tragic effects on the SMEs and it became absolutely important for them to get as much support as they can from their peers and competitors. The major reason for forming associations by companies under study are increasing buying power over suppliers, lobbying with government to implement favourable norms, enjoying healthy margin in the industry, understanding supplier behaviour and payment pattern among other things. However, the pandemic increased the scope of the association into helping each other to deal with employee crisis, health insurance, passing favourable norms and managing finances as well. However, while on surface forming association seemed like an excellent idea with no cons, a deeper analysis revealed that there exist multiple dark sides as well of these associations. Members keep secrets from each other, some members betray/disobey the norms set in the association and leach away the information for their personal gains. This results in formation of internal association within the original association. This decreases the overall buying power of the members and the edge over other industrial hubs. The study focuses on the pros and cons of coopetition in the SMEs, the measures that can be taken to ensure long term association and more benefits and also draws parallel with the association that exists between large scale players. One clear conclusion that can be drawn from the extensive primary and secondary research is that associations are the need of the hour, they are absolutely important for the long-term sustainability of SMEs in a region provided that they lay down strict norms and everyone follows them meticulously.