It is most likely that SMEs will be competing on a basis of
cost. Therefore, knowledge of your production costs and the ability to estimate
the production costs of your competitors can be vital for your success. To
know your own costs you will need a cost accounting systems and procedures
that will give you an accurate estimate of both direct and indirect materials,
labour and expense costs.
It is advantageous to have information on your competitors' costs per unit.
Once these estimates are available, you must take planned steps to ensure that
you are on par with your competitors, or your only option would be to charge
a higher price and justify this increase to your buyer on the basis of an appropriate
positioning strategy.