Local firms enter 2020 in ‘cautiously proactive’ mood
O Monash University Malaysia/CPA Australia survey finds sentiment among SMEs has declined
PETALING JAYA: A majority of Malaysian business leaders are “cautiously proactive” of their company’s prospects for the next 12 months, compared with being “cautiously optimistic” a year ago, according to the Malaysian Business Sentiment Survey 2019/2020 launched yesterday.
The cautiousness stems from the volatile global economic environment given the US-China trade war and Brexit, as well as the rapid diffusion of new technologies that are displacing traditional business models.
Despite these concerns, many Malaysian business leaders have become aware of the need to be “cautiously proactive” in addressing emerging challenges head-on and seeking new opportunities.
They are adopting business strategies to improve operational efficiency, quality of products and services, expand market reach and improve branding and market positioning.
Monash University Malaysia vice president (research & development) Prof Mahendhiran Nair said firms realised that they have to defend existing market and expand to new markets, partly because consumers are now more reserved in spending.
He said firms have no choice but to embrace technology, innovation and business models. They also have to adopt new leadership style – governance, focused, lean, agile and innovative, to lead during these uncertain times and find value for businesses.
“The climate is much tougher compared to 12 months ago but firms realised that they have to go out to drive the change,” he told a media briefing when announcing the findings of the report.
About 74% of respondents were confident of their company’s prospects for the next 12 months, up from 71% in the previous year, buoyed by the revival of mega projects and various macroeconomic policies to increase disposable income and consumption.
About 69% of respondents believe that their business environment will be better in 2020, same as in 2018.
The survey found that business sentiment among small and medium enterprises has declined, while business sentiment among large firms increased significantly, as large firms are able to mitigate economic uncertainties by adopting technologies and capitalising on foreign direct investments.
The top three issues of concern for senior managers are the weakening of the ringgit (34%), cost of doing business (29%) and increasing competition (26%). “Increasing competition” moved up a rank to third, from fourth in the last two years.
The top three factors to have a positive impact on business prospects over the next 12 months include customer loyalty (25%), cost reductions (24%) and market expansion (20%). “Customer loyalty” was not in the previous year’s ranking.
Firms plan to spend more time in areas of cost management (35%), seeking new markets (29%) and marketing & branding (27%).
While cost management and seeking new markets remain the top priorities, firms are showing an increase in investment for marketing and branding, in tandem with an increase in priority of new product development and improving customer loyalty.
“This indicates that firms are shifting into innovation-driven growth strategy, as they move into more competitive global markets, as shown by interest in investments in ICT and Industry 4.0 technologies,” the report stated.
Meanwhile, incremental innovation and improvement remain the core business models adopted by 43% of Malaysian firms, unchanged from last year.
“Product cycles are changing in a fast pace, firms are taking their current products and doing marginal increment, but many are not doing deep research and development,” said Mahendhiran.
Business leaders who expect a higher revenue over the next 12 months has declined to 51% in 2019, from 56% in 2018; while those who expect their revenue to be about the same in 2019 as in 2018 increased to 34% from 28% previously.
These suggest that majority expect their revenue to increase given the increasing investment interest in Malaysia and Asean, but are cautious given the current uncertainties in the global economic environment.
The Malaysian Business Sentiment Survey is a joint initiative between Monash University Malaysia and CPA Australia.