Friday, 6 July 2012

SMEs: Small Medium Extinction?

I keep coming back to the argument I had with my friend who works in the civil sector - the one that comes up with policies for MNCs, SMEs and other related. Its ironic how they keep emphasizing that Small and Medium Enterprises (SMEs) play a key role for a country’s economy.
(Statistics show about 150,000 SMEs in Singapore make up 99 per cent of all enterprises, employing about 70 per cent of the workforce and contributing up to 60 per cent of the National Gross Domestic Product) but yet all across the board are dealt with sudden laws and changes that causes MNCs to find it increasingly difficult to operate and causes SMEs to find it increasingly impossible to push on. With more restrictions and laws put in place, cost increases which makes the pot of profit much lesser. This in turn becomes a vicious cycle where the clients squeeze their suppliers and suppliers squeeze all they can of what they have (and employees making it worse by asking for the higher pay that unions profess about)

 Over the years, the operating environment for SMEs has become tough due to the increasing cost of many factors. One issue that has posed a major challenge to SMEs is manpower. SMEs in Singapore hinge largely on foreign workforce as they are often constrained to attract and hire more Singaporeans.
SMEs are now further daunted by staid manpower issues after the recent announcement of Budget 2012 to reduce Singapore’s reliance on foreign labour with an aim increase local employment rates and to reduce this influx of foreign manpower. Among the myriad measures undertaken, the government has taken another further step with a calibrated reduction in the Dependency Ratio Ceilings (DRC) and the increase in foreign workers levy.

Spoke to some SMEs and in conclusion, here's what:
SMEs would love to hire Singaporeans but- the practical No $ No Talk mindset that we all try to refute jumps back at us? Its not that they want to. But they have to. Specially with the current tight market, they know their worth and many spends their time waiting for the RIGHT job. ( Truthfully, how would you know if its the right job if you did not even try it out . The job scope is just a gauge. Its flexible in jobs , it takes a person's attitude and initiative.)

 And the word "Hiring Talents" to them are for MNCs whose branding has allowed them to price their goods higher and people accepts it as it is but yet try to milk SMEs for all its worth. They have always been hearing all too recent " my company only uses established firms aka MNCs" and "I can pay the other company more because its more established" BUT the client agreeing that their service is better! Gosh. Even in branding, how much can a SME invest? Its minute compared to MNCs. They end off with a sigh. 

For Singapore government, they has rendered assistance schemes to allow SMEs to increase productivity and innovations, and to decrease manpower cost and reliability on foreign workforce. Small businesses are being encouraged to reap the benefits of available grants and schemes laid out.
Although the gateway for production and innovation has been widened to help SMEs to overcome this graduating challenge, not all sectors in the SME industry are able to triumph over this turmoil period by simply making use of such grants.
But many industries are wondering how to maximize the use of the grants. For those with machinery upgrading or perhaps system upgrading its clear-cut if they have enough upfront cash or the possibility to increase profits matching to their current upgrading automation investment (since its not fully covered). According to the article "Automation is not for all firms" , specially for service industries. What or How does it cover a transport business? Create robots to drive the vehicles? Can one make enough to purchase machine to help carry goods of average amount? Is the solution link to the recent fully subsidizing of the driving course for lower wage income earners? - The final question is would they want to become a driver? What or How does it help service industries such as those doing research or learning industries. The system can only do that much. Lastly most of these grants are tax reductions and semi cash payouts - its still outflow of cash - which is a worry to SMEs. E.g. for sending staff for training, or conducting research and development - how does it help?

SMEs are curbed, trying to cope with this pace of changes in regulations . As these changes will be injected gradually into the business world in years to come, business owners should plan viable solutions and creative strategies. To cope with the tight regulations and market locally, companies have tried to seek overseas ventures. I went to an IE Seminar to review about the current help given and were introduced to many IE Groups based in overseas and the possibility of connection. They told me about the current success of primarily products ( food, clothes, machinery etc) which has made leeway in places like Africa, Brazil, Middle East and more. How about services? Truthfully, he told me that was a bit difficult. So what solutions for services? Continue fighting for the local pie. Or take the plunge and do some brand extension.

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