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Six Keys for Making Artisan Businesses More Competitive

By Federico Mazzella ,
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Improvements in competitiveness could lead to stronger and more profitable firms.

High angle view of a mature woman making jewelry in a souvenir store

In addition to reflecting peoples’ collective identities and being one of the most significant ways of preserving cultural and ethnographic heritage, artisanal products also play an important role by contributing to local, regional, and national economies.

As a productive activity, artisanal products and handicrafts are not immune to the effects of the development of information and communication technologies (ICTs), or to market globalization, which have opened up new opportunities and will continue to do so to an even greater extent throughout the different business processes. Globalization also entails opportunities for cooperation and increasing presence in foreign markets that are worth exploring.

At the international level, UNESCO proposes the following definition for these products: “Artisanal products are those produced by artisans, either completely by hand, or with the help of hand tools or even mechanical means, as long as the direct manual contribution of the artisan remains the most substantial component of the finished product. These are produced without restriction in terms of quantity and using raw materials from sustainable resources. The special nature of artisanal products derives from their distinctive features, which can be utilitarian, aesthetic, artistic, creative, culturally attached (video in Spanish), decorative, functional, traditional, religiously and socially symbolic and significant.”

 

The Quest for a Competitive Sector

Business competitiveness is a dynamic, multidimensional concept which refers to a company’s ability to maintain and increase its market share. It is closely related to its competitive advantages, a concept which is made manifest either through lower costs compared to those of the company’s competitors or the possibility of differentiating products.

Improvements to competitiveness in the artisan sector could give rise to stronger, more profitable firms that would be keener to grow and explore all the different ways of achieving this.

In the medium and long term, competitiveness is determined by six major aspects which, if appropriately managed, can improve the growth and profitability of artisan companies:

  • Human resource management:This a key factor for artisan businesses given their production processes and the importance of workers’ skills and expertise for the quality of their products. The small average size of artisan companies further reinforces the importance of human resources to make these businesses competitive.
  • Use of ICTs:ICTs have become one of the key factors in achieving business competitiveness and entail improvements in various ways. Applying these technologies to production processes generates innovations that boost productivity gains. In addition, they enable organizational and commercial innovations and facilitate the internationalization of the company.
  • Innovation:In many respects, quality is closely tied to innovation, and often precedes it. A company’s concern for quality reflects its desire to constantly improve customer satisfaction. One way is to obtain certifications that enhance the confidence of existing and new customers in the quality of the company’s products and services, both in the domestic and international markets.
  • Internationalization:The most frequent marketing channel for artisan businesses is direct sales to specific customers. The use of all other marketing channels is very limited, especially in the case of those that reach foreign markets. An alternative sales channel is via specialized portals and websites.
  • Financing:A company’s financial situation affects its growth potential and determines its strategic planning. Its financial structure, particularly how much it relies on external financing and how this is distributed between short- and long-term funding, is the result of multiple factors, the most noteworthy of which are the company’s strategic policy and the economic situation of the market in which it operates.
  • Business and Institutional Cooperation: In the case of artisan companies, cooperation is especially relevant because of their small average size; it is a way of overcoming some of the disadvantages associated with microenterprises. Among the many advantages associated with cooperation with third parties (companies or other organizations), the most significant benefits are easier, cheaper, and faster access to information, technology, and new markets; obtaining additional human and financial resources; and the possibility of sharing risks, both in the development of new products and services, and in terms of access to foreign markets.

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