McKinsey Report On MSME Productivity

In an Article by By Anu Madgavkar, Marco Piccitto, Olivia White, María Jesús Ramírez, Jan Mischke, and Kanmani Chockalingam, McKinsey reports that ‘…small businesses lag behind large companies on productivity. On average, their labor productivity, or value added per worker, is half that of their larger peers.’

Going through this report https://www.mckinsey.com/mgi/our-research/a-microscope-on-small-businesses-spotting-opportunities-to-boost-productivity provides interesting insights. Some of the ways MSMEs have been able to beat an otherwise gap in productivity are due to a) technology and innovation edge b) building human capital and c) are more globally connected. This aside, some case studies make for interesting reading.

The one on Italy’s MSME wine manufacturing sector while being highly fragmented has been reported as super-productive. These enterprises are 1.5x more productive than their advanced economies counterparts.

Controlled by large players, Winemaking (In the United States is made by less than 0.5 percent of makers). Italy’s winemakers are small, often family-led enterprises. Despite fragmentation and many small players Italian small players have formed a common access to branding and marketing. ‘The “Made in Italy” campaign has championed traditional and local production, with a particular focus on the international market. Italy has more than 500 wines that have Protected Designation of Origin or Protected Geographical Indications certifications. These are stamps of quality in the eyes of consumers and apply to the 42 percent of Italy’s wine production that is exported, enabling small producers to charge premium prices and obviating the need to produce at scale. Where they are located is a key part of marketing. Layered on top of this is that Italy’s MSME winemakers are highly networked with one another through membership of associations or in cooperatives, giving them collectively a louder voice.’

Indian Alphonso mangos and Basmati rice in India, are similar examples. But many others such as Darjeeling Tea are yet to find a Voice.

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*acknowledgements of McKinsey Report and part picture from Vinarius Association