Competitive Strategies on the Performance of Small and Medium-Sized Enterprises in Nepal

Abstract

Small and medium-sized enterprises (SMEs) are the foundation of Nepal's economy, but their competitive strategies significantly impact their success. The primary goal of this research is to investigate the effects of cost leadership and focus strategy on the performance of SMEs in Nepal. To address this, the study examined whether implementing cost leadership or focus strategies significantly impacts SME performance. Using a descriptive and causal research design, this study used a quantitative method with structured questionnaires distributed to 385 SMEs from various industries, including manufacturing, service, and retail. Structured-administered surveys were used to collect data, and statistical tools such as correlation, regression, and hypothesis testing were used to analyze the results. The findings indicate that the cost leadership strategy has a weak but statistically significant negative effect on performance. Although not a primary focus, the differentiation strategy had a slight positive effect. The focus strategy also had a weak negative impact on performance. These findings show that no single strategy significantly improves SME performance in isolation. Instead, a hybrid strategic approach is required for contextual challenges like high import dependence, limited scalability, and aggressive competition. The study suggests that SMEs in Nepal combine cost efficiency with innovation and market-specific targeting, while policymakers should create supportive environments through infrastructure, training, and strategic incentives. An operational, integrated strategic model is required for SME sustainability and growth in Nepal.