The growth challenges facing Singapore's SMEs

The growth challenges facing Singapore's SMEs

For all of our collaborative technologies, businesses today remain worlds apart when it comes to the topic of growth and how to deal with the challenges that it brings.

Some company leaders choose to measure growth in terms of profit, while board members at other businesses see geographic expansion as the priority. Some businesses blame themselves when they don't grow as expected believing their lack of entrepreneurial spirit or restricted skillsets are holding them back, while others believe it to be external factors such as competition and economic uncertainty that prevent their growth.

Needless to say, for such a simple word, "growth" is a more complex topic than it seems.

Recent global research by Morar Consulting and Epicor Software Corporation has explored the different obstacles, stimulants and even definitions of growth throughout the global business community. The journeys that businesses embark on, in order to grow, are different across the globe and some regions and sectors are more optimistic about their prospects than others.

In Singapore, recent trade agreements provide a great growth opportunity for small and medium enterprises (SMEs) to venture into new markets. Both the ASEAN Economic Community (AEC) and the Trans-Pacific Partnership (TPP) aim to increase regional trade through reduced tariffs and quotas, and freer flow of goods, services and skilled labour.

SMEs make up more than 99 per cent of Singaporean enterprises, and contribute nearly half of Singapore's gross domestic product. As the AEC and TPP create larger markets for businesses to operate in, SMEs will be threatened by foreign entrants and increased competitiveness. However, for SMEs challenged by a slowing domestic economy, expensive land and limited manpower, regional expansion provides an opportunity to overcome these constraints and grow their business.

Almost half of Singapore's SMEs expect revenue growth to be driven by overseas expansion, but face challenges in financing and lack expertise in foreign markets. Given that the seeds of future growth potential might well lie in nimble, smaller-sized ventures that can react faster to disruptive technological changes and offer employment opportunities to many more, the Singapore government is strongly supporting SMEs to be more competitive. Initiatives to enable SMEs to invest in technology, upgrade technological sklls and implement innovative technologies will allow SMEs to propel their business forward.

Feeling the fear

Although there is a wealth of growth opportunities for Singaporean SMEs, it will not be easy. Growth may not come in the form we expect - regional expansion could result in a rushed product portfolio development, or an unpredicted surge in demand - and businesses may find themselves unable to cope as a result. In fact, with as many as nine-in-10 Singaporean companies suffering from "unplanned growth", this is emerging as a challenging and potentially damaging business phenomenon.

Growing businesses have to find ways to tackle new challenges. So, when growth is not planned for effectively, or if an unexpected growth surge occurs, businesses can be easily tripped up.

The research demonstrates that around 65 per cent of Singapore business leaders are concerned that growing their business can put excessive pressure on operations, therefore damaging quality and customer satisfaction. Fifty-seven per cent are also concerned that their business IT systems may not cope with managing a larger, more complex business model. CEOs in particular, are worried that growth may also result in a perceived loss of customer intimacy.

Growth can also put a strain on resources within the business as activities scale. Business leaders worry that their businesses might take on large or complex projects that they lack the skillsets and technology to deliver effectively, damaging their brand reputation. They are also concerned that by growing the business, workloads may increase to a level that places too much pressure on staff, prompting key personnel to leave the organisation. Just under half of business leaders polled worry they are not personally prepared for the challenges of managing a larger, more diverse business.

It's no surprise therefore that managing growth expectations is one of the most complex challenges that businesses are currently facing.

Making it look easy anyway

Despite the challenges posed by growth, and growth surges, businesses still want to - and will - continue to grow and 61 per cent of Singapore businesses surveyed expect to grow this year. So how can they make this happen despite the obstacles discussed, and, once they are growing, how can businesses resolve the challenges they encounter?

SMEs are increasingly turning to technology to make growth possible and to manage the resulting challenges. Having an information framework in place is, for many business leaders, providing them with the essential tools and insight they need to make effective, informed decisions as they grow.

Next generation enterprise resource planning (ERP) solutions give business leaders a bird's eye view of operations. This allows them to keep in touch with the nuances of individual processes where necessary, yet access the relevant internal data, customer feedback and financial information they need to remain on course and plan for the future. These solutions, when completely integrated with operations, can collect, manage and report on production line processes, financial performance and distribution times; to optimise efficiencies as a business grows.

Those businesses that have successfully harnessed ERP technology are taking the first step towards mitigating the risks that come with unplanned growth. It doesn't mean that growth is always easy for them - after all, no matter how much we plan for growth, it can still surprise us. But it does mean that these businesses are better prepared when it happens.

The author is executive vice-president, international, Epicor Software Corporation.


This article was first published on July 12, 2016.
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