The changing environment is challenging our small business .

20Jan10

Although China’s economy registered positive growth in 2008 and 2009, yet GFC has dented its economy specifically on the viability of its SMEs.

According to an article by Michael Sainsbury, from Nov 2008 to March 2009 40% of China’s SMEs were very badly affected. . Of this 40 %, 20% had closed down and the balance 20% is badly affected and could be dying unless helps comes fast.

SMEs are important to China as it is to Malaysia. We can just imagine the impact of the closure of the SMEs. It means financial losses. It also means more unemployment. This has affected local supplies which are dependent on the SME. As far as the Bank is concerned, it means more NPL.

What has happened that caused all these? The GFC has tested the strength of the SMEs to survive under such a trying condition. It could be poor sales, low prices, high labour cost, fraud, high interest rate, competition, poor credit supply and all these challenge the SME.

Let us watch how China responds to these challenges to its SMEs.

Despite what the Politician wants us to believe the current business in Sarawak, Sabah and Brunei is worrying. Our SMEs too are facing challenges. Let us give some examples:

  • I used to remember for a long time there was only 1 Instant Noodle factory in Sarawak. Now there are 4. Then we have the imports from China , Korea , Vietnam, Indonesia and all of them can now be imported without import duty  or even if there is , at a very small rate . Our 4 local factories are suddenly faced with competition from overseas which also produces good quality instant noodle and selling them at a cost cheaper than the local ones.
  • Remember the old grocery shops. For many years they monopolised the markets. But now with the arrival of the Supermarkets, competition has arrived. Even the Supermarkets faced competition among themselves and it is not all rosy for some. Whilst Parkson is doing well, I can’t say of Everise Supermarkets, they have to close some of their branches. Perhaps there would be even more competition when we have new Supermarkets and cash and carry commencing to do business.  Do the traditional retailers and even the current Supermarket have the managerial skills and capital to face these challenges?
  • Let us look at the Travel Ticketing Agencies. Having a Travelling Ticketing Agencies used to be a gold mine. Not so nowadays with MAS and Air Asia going on line ticketing. Agency fees are reduced. The only way of surviving is to depend on political patronage i.e. selling to government Officers. This too will be challenged as the airlines requires cash sales or give  limited credit and the Government being a poor master takes a long time to pay .( Still it is worth waiting ). The challenge will come when other Agencies are demanding a share of the Government market. The incumbent are still strong but for how long more.
  1. My friend imports a line of products from West Malaysia. The West Malaysia Company is the sole importer in Malaysia and my friend in Sarawak is their agent.   With parallel imports, his competitors can buy the same products at a cheaper price from Singapore or even from China. My friend who is the sole agent of the products is now left high and dry.
  • Let us look at the local newspapers. Do you remember how difficult it was to do business with Sarawak Tribune? Now they are gone. We have instead Eastern Times and Borneo Post and soon we would have another one The Star? Whilst the newspapers competed among themselves for the advertisement revenue, the internet newspaper like malaysiakini.com and even free malaysiainsider and malaysianmirror.com will snatch some of the advertisement revenue. One of the newspapers will soon close down.
  • Remember how cocky Proton was. Now let us see how cocky they are now.

What I am saying is there will be changes in the business environment. How do we the Small Business responds to these challenges? Who can help us guide us through these stormy sea ?

I invite your opinion.



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