Nearly 70% of Australian small to medium sized enterprises (SMEs) believe that the global economy will recover either in 2010 or 2011, according to the UPS Asia Business Monitor (ABM) 2009, an annual survey conducted on competitiveness and issues facing SMEs in Asia Pacific.
According to the ABM 2009, SME leaders in the Asia Pacific expect their business prospects to be worse this year with 65% of SMEs expecting the economy to decline in 2009 compared to just 2% in 2008. Compared to last year, the number of SMEs across the region expecting economic growth this year decreased four-fold – from 60% in 2008 to 15% in 2009.
In Australia, about a third of SME leaders (33%) indicate that business prospects in 2009 will worsen, with only 27% feeling confident of their business prospects this year. Meanwhile, 40% say that it will remain the same. The majority of Australian SMEs (67%) say that the slowing market and economic downturn are the biggest concerns that keep them up at night. This is followed by cashflow/rising debt (48%) and finding/keeping qualified staff (43%).
The ABM 2009 also revealed that for Australian SMEs to enhance their competitiveness, the government must focus on education and training (92%), research and development (79%), and transportation infrastructure (75%).
To counter the current global economic condition, the research shows that Australian SMEs see growth opportunities in forging new business ventures, acquisitions or partnerships (21%) and moving to higher value-added products and services (20%).
“Australian SMEs are taking a long hard look at their businesses to find expansion opportunities like starting new business projects in order to survive the downturn. We also see that most SMEs are tightening cash flow management through strict credit control and collection plans as a contingency to sustain their business this year,” said Jeff Fairbairn, managing director of UPS Australia.
Australian SMEs also believe that the top two factors that will lead to an economic recovery are:
- economic performance (49%), which includes a return in consumer confidence and resumption in spending and the U.S. market recovery and growth;
- government regulations/policies (30%) consisting of more spending on infrastructure.
In the short term, to sustain the business and counter the effects of the global economic recession, Australian SMEs are planning to implement measures such as tightening cashflow management via strict credit control and collection plans (79%), reduction of other costs such as rent and utilities (63%), and diversifying and/or exploring new revenue streams (61%).
For the long term, Australian SMEs are concerned with costs (77%), industry downturn (75%) and debt/cash flow (68%).
“As Australian SMEs look for innovative ways to become more efficient, reduce costs and better serve their customers, UPS is in a good position to help businesses ride out the recession. SMEs can call on our expertise, to help develop supply chain strategies that will improve their business,” added Fairbairn.
Key highlights from Australian SMEs in the UPS ABM 2009 include:
Only 19% of SMEs plan to increase their workforce, a significant drop from 52% last year. This year, 60% of Australian SMEs will maintain the size of their workforce.
Industry sector growth opportunities
Twenty-five percent of Australian SMEs think that the Agriculture, Forestry and Fishing, and Manufacturing sectors present the biggest growth opportunity for the country followed by IT, Mining, and Building and Construction (24%). Leisure and Tourism is next at 20%.
Key economic pillars in three-to-five years
With the changes in the financial services sector, Australian SMEs believe that the three industries that will become key economic pillars are: Mining (63%); Agriculture, Forestry and Fishing (37%); and Leisure and Tourism (24%).
Forty-one percent of those outside Australia rated Australian SMEs to be more competitive than them. This is an increase compared to 2008 when 35% rated Australian SMEs to be more competitive.
Obstacles to SME competitiveness
Australian SMEs think that the availability of a qualified workforce, labour costs, transportation infrastructure, and government support are lacking and are obstacles to their competitiveness.
Changes in supply chain practices
When asked what best describes the changes Australian SMEs will make to their supply chain practices in the current economic conditions, almost half (47%) said that they will focus on reducing transportation and distribution costs while 44% said there will be no change in their supply chain practices.
Seventy-four percent of Australian SMEs think that loyalty is the most important value that is disappearing in the Australian business environment, followed by trust (65%), gentleman’s agreement (59%) and respect (57%).