Adapt or die
Thai family businesses, particularly smaller ones, face high risk of collapse as economy slows, PwC Thailand warns
Small family businesses face a high risk of collapse if they fail to balance costs and reduce risks that could lead to business failure, according to the Global NextGen Survey 2019 - Thailand Report by PwC.
Digital transformation is the top challenge facing Thai family businesses over the long term, even as a looming recession and the Covid-19 outbreak provide more immediate worries, the report says.
To survive and thrive in the long term, PwC recommends the next generation of leaders adopt digital transformation and focus on upskilling employees.
The downturn in Thailand’s economy is generating concern in many sectors, said Niphan Srisukhumbowornchai, clients and markets leader, entrepreneurial and private business leader and tax partner at PwC Thailand. It’s possible both the Thai and global economies will continue to face an economic slowdown for a while longer in light of several negative factors.
In Thailand, severe drought conditions, the delayed fiscal budget and the Covid-19 outbreak have affected supply chains and production.
Domestic consumption has been blunted by shrinking purchasing power caused by dwindling income in the logistics and tourism sectors.
Specifically, farmers’ incomes are projected to decrease as a result of the drought, while factory workers have also been affected by manufacturing shutdowns — both temporary and permanent. These factors are putting pressure on economic growth, he said.
The downturn will have a significant impact on family businesses, small and medium-sized enterprises, and small companies with low cash flows, said Mr Niphan.
If economic conditions don’t improve in the next few months, these businesses are in danger of collapse. That makes it essential to reduce unnecessary costs.
“There is concern a Covid-19 pandemic will trigger another global financial crisis,” he said.
“We need to keep an eye on this situation, how long the surge in Covid-19 infections will continue and when Covid-19 will stop spreading. If the outbreak continues to widen, we will see some small companies close down.
“On the other hand, this is an acquisition opportunity for family businesses that are cashrich and looking for the right partner at a good price because of low interest rates.”
DIGITAL DISRUPTION
Mr Niphan said the PwC survey found next-generation entrepreneurs perceive digital disruption to be the top challenge for family business.
The survey assessed the views of more than 950 next-generation family business leaders worldwide, including 31 respondents from Thailand.
Digitisation is a strategic priority for “NextGens” to transform their family business to deal with technological changes and gain a competitive advantage, the study found.
According to the survey, 83% of NextGens said the top priority is to devise a business strategy fit for the digital age. Other top priorities include attracting and retaining talent (62%) and upskilling staff (62%).
Some 79% of Thai NextGens believe digital transformation is an area where they can personally add the most value in realising family business goals.
Digitisation is not new, but ensuring a smooth and successful transformation is a struggle for many Thai family businesses.
“The findings show that NextGens really want to digitally transform their family businesses because they’ve grown up with emerging technologies and are familiar with innovations,” Mr Niphan said.
“However, during the economic downturn, family businesses have to manage priorities and balance business growth and challenges to get through all the difficulties smoothly.”
NO-COST UPSKILLING
The report shows 83% of Thai NextGens believe they can add significant value to the family business through skill development. The percentage is higher than their peers in Asia-Pacific (62%) and worldwide (61%).
The economic slowdown may weigh down the pace of digital transformation and upskilling, but he said doing nothing will cause even more pain.
Every organisation, including family businesses, eventually must pay close attention to digital transformation and upskilling because they will be beneficial in the long run. The survey found companies that adopt new technologies can manage costs better than those that have not. In addition, new technologies help enhance production efficiency.
“Upskilling is something that can’t wait,” Mr Niphan said.
“There are so many ways NextGens and staff can upskill themselves, including learning from websites, applications, or taking courses that provide knowledge about necessary skills in the future. Some universities provide free digital online courses.
“NextGens and business leaders should realise that even though the economy is not good, they have to develop themselves and their organisations. Upskilling is everyone’s duty and responsibility to survive and thrive in the digital world.”
‘‘ The economic downturn is an acquisition opportunity for family businesses that are cash-rich and are looking for the right partner at a good price because of low interest rates. NIPHAN SRISUKHUMBOWORNCHAI Entrepreneurial and private business leader, PwC Thailand