Соmpetitiveness of Smes in Terms of Industry 4.
0
Anna Kukharuk
Department of International Economics
National Technical University of
Ukraine “Igor Sikorsky Kyiv
Polytechnic Institute”
Kyiv, Ukraine
annakukharuk@gmail.com
Abstract—The study is devoted to the peculiarities of the
competitiveness of small and medium-sized enterprises under
Industry 4.0 conditions. The article generalizes the scientific
approaches to the definition of factors of enterprises’
competitiveness. The paper summarizes the main trends and
challenges for enhancing the competitiveness of an enterprise
in terms of Industry 4.0. Authors clarify the key components
and factors of competitiveness of small and medium-sized
enterprises in Industry 4.0 environment, among which there
are highlighted an ability to involve, use and develop
informational resources, an ability to improve the available
technology, to change or develop the main technology of
production, to use new methods for automated quality control,
implementing Internet of Things concept. The article
summarizes that the key factor of the strong competitive
position of small and medium-sized enterprises is their
readiness to change or develop quickly the main production
processes by using new methods of management and new
information and production technologies.
Keywords—competitiveness, economic factors, competitive
advantages, Industry 4.0, SME, determinant, information,
technology, economic environment, business activity
I. INTRODUCTION
The current stage of the world economy development is
characterized by qualitative and quantitative changes in the
mass production structure. The share of industry in the total
amount of added value decreases, the number of goods of
non-material form is growing, brand new consumer behavior
patterns are developing, which are based on the value of
convenience, simplicity, and predictability of goods usage.
Today, the consumer is still giving preference to high
quality goods. However, the more affordable, convenient,
cheap goods are more competitive. The speed of satisfaction
of needs becomes more and more valuable.
At the same time, global competition is deepening, as
even big business becomes mobile by using innovative
management tools. The problem of adapting to new market
conditions is the most acute for small and medium
enterprises, because the innovative production and relevant
marketing mechanisms requires a free money supply, which
is often lacking at the enterprises of that kind.
Problems of competition and companies’ competitiveness
management have been the research issue for such scientists
as Porter, Ketels and Delgado [12], [10], Bartling, Fehr,
Marechal and Schunk [3], Connor [18], DiazChao, Sainz-
Gonzаlez and Torrent-Sellens [1], Flak and Glod [14] and
other. The mentioned authors have built the theoretical basis
for further research related to enhancing competitiveness on
the microeconomic and macroeconomic level. However, the
specific terms for industrial and commercial activities as well
978-1-7281-3467-3/19/$31.00 ©2019 IEEE
Julia Gavrysh
Department on Industrial Marketing
National Technical University of
Ukraine “Igor Sikorsky Kyiv
Polytechnic Institute”
Kyiv, Ukraine
juliagavrish@gmail.com
as the formation of competitive advantages today are the
conditions of Industry 4.0, in which specific rules of
competition begin to operate. On the one hand, usage of
Industry 4.0 principles is a positive factor of
competitiveness. On the other hand, Industry 4.0
environment generates impulses to deepen the competition in
the markets of goods and services. Thus, there is a need to
identify the determinants of the competitiveness of small and
medium-sized enterprises (SMEs) in the new global
economic environment, under Industry 4.0 conditions.
II. FACTORS OF THE COMPETITIVENESS OF SME
Traditionally, the enterprise's success is identified with
profitability. However, the competitiveness is a much
broader concept and includes such aspects as growth,
creation of new jobs, the role, which is played by the
enterprise in the market. In its turn, the competitiveness can
be both the result and the factor there in the system of
relations between the enterprise and market. For instance, a
high degree of competitiveness is a result of a certain internal
economic factor. Conversely, the high level of the
competitiveness forms certain economic indicators of the
enterprise (profitability, financial stability, etc.). In the future
we will consider competitiveness of the enterprise as a result
from different efficient economic, technological and
management processes.
Factors and components of SMEs’ competitiveness have
been revealed quite fully in the majority of thematic
scientific literature. There are many views on the factors of
competitiveness of the enterprise. In particular, V. Pavlov
[19] divides factors into two groups, namely: external
(economic status, scientific and technical development,
political situation, demographic factors, the level of
development of information technologies, cultural traditions,
etc.) and internal (financial, production, marketing,
organizational and managerial). M. Porter [11] notes that the
main factors of the company's competitiveness are natural
resources, climatic conditions, skilled labor, return on
capital, etc.
It is obvious that in order to carry out an assessment of
competitiveness, taking into account all of the above criteria,
the company must have a staff of highly professional
employees, to allocate money for conducting research, and
provide a sufficient level of research automation. It is quite
difficult to obtain an adequate indicator of competitiveness.
Therefore we propose solving this problem by reducing the
components of competitiveness, which, in turn, will allow us
to develop methodological aspects of the assessment which :
• fit for any enterprise;
 • are adapted for further comparison of industrial
enterprises of different sizes and the production structure;
• are suitable for the assessment of the competitiveness
of a complex of industrial enterprises, representatives of
related industries.
It is advisable to reconsider the set of factors of
competitiveness and choose the ones that in our opinion are
the most important in Industry 4.0. In particular, the
execution of this task is necessary for further SMEs
competitiveness assessment.
III. INDUSTRY 4.0 CHALLENGES FOR SME’S SUCCESS
Western civilization has already witnessed three
industrial revolutions, which could also be described as
disruptive leaps in industrial processes resulting in
significantly higher productivity. The first improved
efficiency through the use of hydropower, the increasing use
of steam power and the development of machine tools. The
second brought electricity and mass production (assembly
lines), and the third and most recent further accelerated
automation using electronics and IT [16].
Industry 4.0 is a term for the so-called “fourth industrial
revolution” and in essence means the technological
integration of cyber-physical systems (CPS) in the
production process. CPS enables (internet-based) networking
with all participants in the value creation process [5].
Industry-4.0 is the paradigm that provides the opportunity for
a balanced transition from the classical production system of
the late XX to early XXI century to the weighted use of
information and communication technologies (ICT) in the
production process at existing, modern enterprises as well as
those that are being designed. This also applies to larger
objects, such as a country, a region or an integration union of
countries [17].
The benefits of the 4th industrial revolution are evident to
large technological innovation companies. However, small
and medium-sized manufacturing companies often do not
have sufficient resources, so it is difficult for them to
compete with big business. Industry 4.0 could have negative
consequences for the competitiveness of the SME. Given the
peculiarities of the processes of the fourth industrial
revolution, as outlined in [5], [6], [8], [16], it is possible to
generalize that the main challenges for the success of the
SME are financial, information and technological.
A. Financial Challenge
The implementation of qualitative changes in the activity
of SMEs is possible if necessary and sufficient financial
resources are available. Proper financing is quite important
for both the equipment, which should meet trends in the
Industry 4.0 market, as well as for business processes
software, at all the production cycle stages. In addition to
being confident in the favorable economic situation of
counteragents, it is important to assess adequately own
business opportunities for the financial self-sufficiency,
especially in the period of cheapening the national currency
and raising of world prices.
The ability to accumulate and effectively use financial
resources is a prerequisite for the creation of financial funds,
which is strategically important for those SMEs whose
purpose is to expand production. However, the processes of
accumulation are under constant negative influence of
currency fluctuations. As a result, the revenue from the
domestic market may not be sufficient to cover the costs
associated with the import of raw materials and to provide
the proper level of the profitability of sales.
For example, in Ukraine, the trend of changes in
exchange rates (Fig. 1) indicates a stable unfavorable
financial situation compared to countries with a relatively
high level of international competitiveness.
Fig. 1. The dynamics of the exchange rate of the national currency to the
US dollar in the countries of the world, units per 1 usd.
Source: compiled according to [7]
Іn order to overcome the negative influence of the
financial factor, the following steps of the CME are needed:
• continuous financial selfassessment;
• identification of priority sources of financing for
production and commercial activity and innovation
projects
• development of strategy for diversification of
financial risks
• development of export strategy, including search for
ways to minimize transaction costs.
B. Information Challenge
The information support of SMEs determines their ability
to adapt to market changes. Properly processed information
flows serve as a competitive tool. In the conditions of the
rapid development of the digital economy, the ability to
quickly obtain the necessary information and use it as a tool
for economic growth has a strategic importance for
enterprises in all industries.
Information determinants of competitiveness of SMEs
can be conditionally divided into two groups: information
purposes and information tools. Information tools can be
characterized by defining the content of information
resources of enterprises.
According to [15], the components of information
resources of the enterprises are as follow:
 • information resources, presented in the form of data
in the production information system, as well as
knowledge and experience of the staff;
• knowledge and experience of consumers, partners and
other contractors of the enterprise, its brand, image,
and communication circuits.
Given the large arrays of information, which must be
taken and handled daily by the subjects of the industrial
enterprises, the information security systems used by them
should be automated. The need for implementation of
automated information support systems is largely caused by
the constant increase of requirements to the level of
feasibility of making technological and managerial decisions,
including those concerning implementation of іnnovation
projects [20]. In the Industry 4.0 effective automated
informational support becomes a key tool for successful
commercial activity.
• poor countries are already becoming the suppliers of
the raw material and human resources for the rich
ones. Since the key factor in development is talent
and professional staff, they are already washed away
by rich countries. Wealthy countries at the level of
property rights own all the new technologies,
• threat of cyber security will grow – a lot of polls in
the world point to managers' concerns about new
threats of cyber attacks.
IV. KEY COMPONENTS OF SME’S COMPETITIVENESS IN
INDUSTRY 4.0 ENVIRONMENT
The above mentioned trends and challenges cause the
need for enterprises to develop new competencies and
capabilities, which can be summarized as components of
competitiveness in the Industry 4.0 environment (Tab. 1).

C. Technological Challenge TABLE I. KEY SME’S COMPETITIVENESS COMPONENTS

Source of the Key for

Particular components of the
competitive Industry
According to [9], Industry 4.0 has some very important advantages
competitiveness
4.0
advantages for people, business, and government, namely: Main production assets;
efficiency, availability of
• An unprecedented (exponentially, not linear) growth Production
capacities, the possibility of -
potential
of innovation – with regard to their speed, volume their rapid involvement, ability
and impact. This will greatly improve efficiency, to meet relevant market needs
Material resources:
productivity and cost savings. sufficiency, quality, level of
• The unprecedented growth of data and the expenses for supply and
storage, dependence on
possibilities for their use for new technologies already suppliers.
makes it easier to attract different types of developers Resources Labor: sufficiency, level of -
– customer users and promote development in many education, experience, etc.
Information: availability of
ways. data and databases, the
• Artificial intelligence becomes a reality – there are possibility to update them
constantly.
many examples may be seen nowadays, e.g. mass Availability and stability of
robotics and biotechnology. financing; the possibility of
Financing investing in innovative +
All the above mentioned advantages will contribute to the projects.
growth of world wealth and the reduction of inequality
The possibility of rapid transfer
between countries, as the result of these processes will be as of managerial decision to
follow: Management execution, controllability. +
Managers: professionalism,
• cheaper and accelerated horizontal and vertical credibility, trust.
integration; Own laboratory raw materials
and products quality control.
• cheaper maintenance of control systems; R&D Waste reducing. +
Development of new products.
• industrial digitalization, implementation of smart Rationalization of production.
technologies at the industrial enterprises; Market research.
Distribution of manufactured
• strengthening the export potential of countries which Marketing products (use of existing -
networks, creation of own
implement the principles of industry 4.0 network) etc.
• reforming the education system for the training of Information
Ability to involve, use and
develop informational +
specialists of a new type. potential
resources.
Ability to improve the available
At the same time, new trends bring new challenges. For technology, to change or
instance, according to [9], Technologic
develop the main technology of
al readiness
production, to use new methods +
• there may appear problems with unemployment and and
for automated quality control,
development
the distribution of world wealth – poor countries can implementing Internet of
become even poorer, and rich countries can expect the Things concept.
Source: developed by authors on the basis of [2]
significant upheaval in connection with the massive
rotation of industries;
 Summarizing mentioned in Table 1 key components of
the competitiveness of SMEs in Industry 4.0 environment, it
possible to conclude that the key factor of the strong
competitive position of small and medium-sized enterprises
is their readiness to change or develop quickly the main
production processes by using new methods of management
and new information and production technologies.
V. CONCLUSION
An enterprise is not a closed system: it constantly
interacts with the external environment (suppliers,
customers, etc.). When choosing contractors the company is
guided by certain principles. Thus, in a competitive struggle
of suppliers of raw materials obviously wins the supplier
with the most favorable terms for the customer. If the
customer is a production enterprise, the criteria for choosing
the supplier will be based on client's requests of the
manufacturing enterprise (intermediate or final consumer of
finished products).
However, fourth industrial revolution deepening as well
as the development of Industry 4.0 concept causes
fundamentally new factors and components of
competitiveness. Therefore, the old models of assessing the
company's competitive position are no longer effective
enough.
Today, the business is successful if it responds to rapid
changes in the development of information and technology,
when employees work as controllers, and most production
processes must be automated.
The study provided an opportunity to identify the key
components of the competitiveness of small and medium-
sized enterprises in Industry 4.0, namely: financing,
management system; R&D; information potential;
technological readiness and development.
A promising direction of further research is the choice of
methods for quantitative assessment of the information
potential of the enterprise as well as its technological
readiness to implement the principles of Industry 4.0.
ACKNOWLEDGMENT
Authors are grateful to the research team of the
Norwegian University of Science and Technology (NTNU),
for supporting the research on Industry 4.0 within the
framework of the project CPEA-LT-2017/10047 “NTNU-
KPI Collaboration within Industry 4.0 Education”.
Authors thank the Association of Industrial Automation
of Ukraine for educational work in Ukraine regarding
Industry 4.0 processes and challenges.
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