Better business in 2008

Almost two thirds of small-to-medium enterprises (SMEs) leaders across Australia say their companies overall prospects for 2008 are better than last year but retaining quality staff will be their key business challenge, according to the UPS Asia Business Monitor 2008 (ABM), an annual survey conducted on competitiveness and issues facing SMEs in Asia.

Outside of Australia, Asian SMEs ranked concerns over political and economic stability and business financing as the biggest challenges they face. The research also found that SMEs in China continue to be regarded as the most competitive in the region.

“SMEs across the Asia Pacific region are generally facing similar issues. However, outside of Australia, SMEs are experiencing feelings of uncertainty towards resolving key business issues such as garnering business financing,” said Jeff Fairbairn, managing director, UPS Australia.

“Of the 100 companies surveyed across Australia, almost half (48%) of the respondents perceive the economic emergence of China as a boost to business.

“Not surprisingly, Australian SMEs polled this year identified the mining industry as offering the best opportunities for business growth but will be looking to suppliers with the relevant trade finance solutions to help exploit these opportunities.”

Australian SMEs cite lack of knowledge (56%) and time (54%) as the two top factors hindering their adaptation to the Digital Age.

The UPS ABM 2007 survey was carried out in Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan and Thailand.

Key findings in the UPS ABM 2008 include:

Skepticism on regional economic growth

Fewer SMEs are expecting economic growth compared to last year in 11 out of the 12 markets polled, indicating a dip in optimism across the board. Japanese SME leaders show the biggest lapse in confidence, with only 36 percent anticipating growth, followed by South Korea (57 percent) and Thailand (44 percent) respectively.

Hiring freeze or headcount reduction likely among Asian SMEs

The UPS ABM 2008 shows that SMEs are hesitant about their prospects for workforce growth. More than half of the SMEs polled do not plan to hire or are considering reducing headcount. This indicates that the SME community may be bracing themselves for a tougher business environment.

Trade with North America expected to decrease significantly

In line with the current economic climate, only 39 percent of SMEs expect trade with the United States to grow, compared to 51 percent in 2007, while only 25 percent (versus 32 percent in 2007) expect the volume of trade with Canada to grow. Outlook on Intra-Asia trade remains robust at 71 percent, while there is a slight improvement in the outlook for trade growth with the Middle East, Europe and Latin America.

U.S. economic woes create uncertainty in the region

The possibility of economic downturn in the United States is creating anxiety among SMEs in the region. SMEs in Indonesia (63 percent), Hong Kong (57 percent), South Korea (54 percent) and Singapore (53 percent) are most concerned their businesses will be hampered by a U.S. economic downturn.

Eroding business growth and competitiveness

SMEs in India, China, Taiwan, Singapore, Hong Kong and Japan feel their own companies will not perform as well as they did in 2007. Though there were pockets of optimism in other markets with regards to business growth, SMEs across all markets except India show declined confidence in their own competitiveness.

The workforce headache

Nearly all SMEs (90 per cent) across the region recognise that having a qualified workforce enhances competitiveness. However, half say that retaining a qualified workforce is the most pressing business issue.

The China paradox

While fewer SMEs regard China as a threat compared with 2007, the UPS ABM 2008 shows that mixed feelings still linger. Twenty-one percent of SMEs still view China as a threat while 30 percent view it as both a threat and a boost to their business, indicating that Asian SMEs are still unsure about the impact of China’s growth to their businesses.

The supply chain puzzle

Though 80 per cent of SMEs across the region believe supply chain efficiency is important to their competitiveness, the majority seem unsure about how to achieve this. Nearly one third of SME respondents are still experimenting with ways to manage their supply chains more effectively, and over a quarter acknowledge they are underutilising the power or neglecting the management of their supply chains.

Getting through the business financing maze

More than half of the SMEs polled face difficulties related to business financing. Regionally, 38 percent find bureaucracy and red tape a hurdle in processing their applications for funding, while nearly 30 percent each cite lack of institutions willing to lend to small business and insufficient collateral as issues.

Urgent call for government action in sustainability

An overwhelming 81 per cent of SMEs polled feel that the government should take a more active role in sustainability, while another 51 per cent of SMEs feel large corporations should take on more responsibility. SMEs cite cost (67 per cent) and staff motivation (49 per cent) as the two major challenges to their ability to champion sustainability practices.

Since its launch in 2005 the UPS ABM has been conducted annually to deliver the latest insights on the changing business needs of SMEs, the largest business community in the region. According to Asia Pacific Economic Co-operation (APEC), SMEs make up about 99 percent of enterprises in the regional APEC economy, contributing between 30 and 60 percent of an economy’s gross domestic product.

This year, the UPS ABM 2008 surveyed 1,201 company owners, proprietors, CEOs, managing directors and other top management across 12 markets.


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