SMALL ENTERPRISES, BIG BUSINESS
Small and medium enterprises (SMEs) are increasingly recognised as the backbone of society in terms of their contribution to the economy and employment, responsible for over 90% of employment in Asia. However, the role of SMEs as customers receives scant attention.
SMEs are still perceived primarily as producers or providers of goods and services. In truth, they are also clients to others. In this edition of Asia Focus we will explore an emerging trend, in which SMEs are increasingly becoming target customers of large firms, with key implications for both manufacturing and service industries.
To succeed in a fierce and competitive marketplace, SMEs must remain on the cutting edge when it comes to catering to the needs of their customers. They must search for new ways to improve their performance, and we have witnessed a response in this area from large companies. These companies are recognising that understanding SMEs and delivering the products and services they require are important if they too want to benefit from the rise of SMEs.
For example, the global industrial conglomerate Siemens recently opened a factory in Mumbai offering high-tech machinery and accompanying software at affordable prices to Indian SME manufacturers.
SMEs are going through a transformative phase in this digital era, with technologies helping them improve the productivity, flexibility and efficiency of their operations. In this regard, large enterprises can act as enablers by reaching SMEs through their targeted offerings.
In addition to manufacturing excellence, SMEs are also interested in acquiring business solutions to strengthen their operations. The web service giant GoDaddy Inc recently introduced a suite of tools for SMEs in the Philippines. GoDaddy’s new website builder aims to help small businesses create mobile-optimised websites that help them reach larger pools of customers in the fast-growing online world. Key features include a smart learning system that provides SMEs with necessary data to develop customer engagement and other activities such as sales and marketing.
Dealing with regulatory change is an unavoidable obstacle for SMEs. In India, for example, the new Goods and Services Tax (GST) requires businesses to file taxes multiple times, creating huge compliance requirements. Intuit QuickBooks has, therefore, introduced a GST-ready version of its online accounting software to help small businesses operating in the Indian market to comply with tax requirements. It enables them to track expenses and income, create invoices, file taxes, and retrieve data at any point in time from both desktop and mobile devices.
SMEs are recognising the need to expand their businesses beyond domestic markets into the international domain. Subsequently, business travellers are on the increase and are becoming a potential market for travel businesses. Capturing this trend are Singapore Airlines and AirAsia, with both launching new loyalty programmes designed with SME travellers in mind, offering flexible options and service terms depending on their requirements and budgets.
Being able to penetrate overseas markets is an important strategy for growing a business. However, SMEs are still struggling with limited resources, including a lack of market intelligence and language skills. Here is an opportunity for larger firms to help SMEs bridge the capability gap.
For instance, Alibaba Group Holding has ramped up the effort to encourage the placement of foreign products on its Tmall platform to serve the growing demands of the Chinese middle class. Not only does this provide more choices for Chinese consumers, it also enables foreign producers and traders, especially SMEs, to enter the Chinese market while overcoming market-specific obstacles.
Catering to SMEs presents a number of business opportunities. However, larger enterprises must approach these opportunities with caution. First, SMEs are price-sensitive given their limited financial resources. Secondly, the heterogeneous character of SMEs leads to varying requirements and expectations. Third, while SMEs are early adopters, they may lack the skills and expertise that would enable them to make the most of their purchases. Therefore, larger businesses must ensure that offers are flexible in their pricing and applications.
Furthermore, offerings for SMEs should be bundled with training and consultancy packages. As a consequence, large firms should opt for the simplest possible implementation while also preparing staff to handle queries in the form of 24/7 call centres, real-time chat platforms, and on-site visits.
As a final point, large companies’ targeting strategies also need to consider different business characteristics at each stage of the SME life cycle. Selling products and services to SMEs with growth aspirations may not be the same as pitching to those operating in a stable and mature stage.
At the same time, business expansion tools geared toward rapid growth may not be fully applicable to new SMEs at the introductory stage. Meanwhile, international solutions may not be relevant to domestic-orientated SMEs. To successfully target SMEs, large companies need to make sure that they are offering the right products and services to their target markets.
In summary, the growing demand by SMEs for operational and expansion offerings represents an important opportunity for large businesses to expand their own operations. Nevertheless, there are certain risks involved that may deter a company’s motivation to target SME clients. Considering the opportunities and challenges, is it time for your business to make a move?
SMEs are going through a transformative phase in this digital era, with technologies helping them improve productivity, flexibility and efficiency. In this regard, large enterprises can act as enablers by reaching SMEs through their targeted offerings