SMALL companies worldwide are transforming themselves into global players by effectively using information technology. And their experiences provide lessons for small and medium enterprises (SMEs) in Singapore.
For example, Polish retailer Zabka, founded as a start-up in 1999, grew to a network of almost 2,000 outlets within a few years. It adopted a franchising model that relied on IT to manage data and carry out all processes in the supply chain - from capturing sales to verifying orders and replenishing inventory.
Another example is Ni-roku, a small magnet maker in Kobe, Japan, which set up a website in 1997. Within three years, its annual e-commerce sales surpassed US$700,000 mark.
Setting up an online presence
According to Peter Leong, director of the SME Infocomm Resource Centre @ Singapore Polytechnic (SIRC@SP), the Internet is a cost-effective means to expand market reach through top-line growth, as Ni-roku has done.
A well-planned online strategy opens the door to huge business opportunities in the region for a start. As Dr Leong points out, South-east Asia presents a potential market of 560 million consumers, many of whom are becoming more online-savvy by the day. Vietnam, for example, recorded a 10,000 per cent increase in the number of online users between 2000 and 2008. And Indonesia has the world's fastest-growing Facebook population. 'Singapore is sitting in a region where there is tremendous growth,' he says.
This correlates with a recent study by AMI-Partners, which found that Australian, Korean and Japanese SMEs will spend more than US$7.6 billion in 2009 on their online presence. At least US$1.6 billion will be spent on online advertising, with websites accounting for the rest.
'The market is growing fast because more customers are going online and businesses are following in their footsteps,' says Vu-Thanh Nguyen, research analyst at AMI-Partners. 'Besides, the global crisis is forcing SMEs to find cheaper and better ways to reach their customers, and that is what online advertising offers - we are forecasting higher online advertising spending by SMEs this year.'
Tapping on the mobile opportunity
Increasingly, online content is also being accessed via mobile devices. Finnish mobile phone maker Nokia estimates that 1.8 million people worldwide become mobile-phone users for the first time each day. A sizeable number of these people are from South-east Asia, the Indian subcontinent and China. And many of them expect Internet access with their first phone.
This presents Singapore SMEs with a huge opportunity. 'Many mobile users are not big computer users,' says Dr Leong. 'So if you do mobile advertising and can send information that users can access through a mobile device, potentially you can make an even bigger impact than just going online.'
Mobile devices enable businesses to interact with their customers seamlessly - and in real time.
Singapore's extensive mobile phone and wireless coverage allows SMEs to deploy an array of sophisticated and innovative mobile services to reach out to potential customers through targeted marketing to drive consumption of their goods and services. For example, through location-based mobile advertising, retailers and restaurants can send advertising messages to the mobile phones of target customers in the vicinity.
Greater business visibility through IT
Besides top-line growth, SMEs' technology efforts are focused on improving processes within their business, according to a global study of over 320 SMEs worldwide by the Economist Intelligence Unit (EIU).
Poland's Zabka, for example, has implemented an IT system to automatically capture, process and verify incoming orders from franchisees' points of sales. The information is then made available to an accounting module. The system also monitors inventory at warehouses and outlets and triggers a replenishment process when necessary. This has boosted the company's capacity and capability to handle bigger business volumes and make better decisions to support its growth.
Dr Leong reckons Singapore SMEs should be more systematic in capturing data about their business operations. 'To be more efficient, they need to capture more information about the business itself - what is more profitable, the effectiveness of their promotions, and which packages or bundles are better received by their customers,' he says.
Managing business costs
One of the main purposes of technology is to help businesses cut costs - especially amid the downturn. One way to do this is through the use of Voice over Internet Protocol (VoIP). Calls can be made without using the public switched telephone network or paying long-distance tariffs.
A popular VoIP service is Skype (www.skype.com), which allows users to talk for free over the Internet after downloading a program onto their computers. A study published by the United Nations Asia Pacific Development Information Programme showed that about 30 per cent of subscribers - primarily SMEs - use Skype for business purposes.
Video-conferencing technology, too, is gaining popularity amid rising air travel costs and pandemic fears. In a recent survey of 2,000 SMEs in 20 countries, research firm Ovum found that SMEs everywhere showed an increased interest in video-conferencing.
Singapore-based Opulent Techno, a provider of thermal solutions, can attest to the benefits of video-conferencing. It has manufacturing operations in China and Malaysia, a logistics function in Hong Kong, and site offices in the US, Europe and South-east Asia.
Given the international nature of Opulent's operations, some of its staff spend a lot of time travelling. 'A one-day meeting could involve three days of travel there and back, which was quite time-consuming,' says the company's finance director, Ng Liew Cheng.
Opulent has therefore implemented a unified communications solution that integrates real-time communications with audio and video-conferencing. This enables its staff to communicate with customers 'face to face' without having to get onto an aeroplane. Opulent says it has been able to cut travel expenses by 30-40 per cent, as more meetings can be conducted online.
IT initiatives
As shown by the experience of these SMEs, IT can be a key business edge. Many respondents to the EIU survey said they intend to spend more on IT to get ahead of their competitors. In Singapore, initiatives such as the Digital Concierge (www.digitalconcierge.sg) and SIRCs are available to help SMEs take the same technology-enabled path to business success. SMEs can capitalise on the opportunity to move ahead with IT.
This article was contributed by the Infocomm Development Authority of Singapore.
Visit www.ida.gov.sg/sme to find out how the Infocomm@SME programme can help you adopt infocomm for your business
