As featured in Enterprise IT News, Malaysia SME Magazine- Nov, 2017
Small & Medium Enterprises (SMEs) are the backbone of most ASEAN economies, typically accounting for 90 to 95 per cent of companies in a country. Many of these businesses find that only selling locally is insufficient to achieve commercial success. According to SME Corporation Malaysia’s 2016 Q3 SME Performance Survey, many SMEs had concerns on the rising business costs as well as falling demand of goods & services. As high operating costs are a top growth constraint for Malaysian businesses, expanding overseas might help to defray some costs as well as ensure continued survival by introducing additional revenue streams.
The establishment of the ASEAN Economic Community (AEC), as well various regional Free Trade Agreements (FTAs), ties in with Malaysia’s very own SME Masterplan (2012-2020), which aims to accelerate the growth of SMEs and increase their contribution to the economy by the year 2020. Overseas expansion is an opportunity that Malaysian SMEs should leverage to gain the competitive edge.
So how can local enterprises take their first step towards overseas expansion?
Leverage the ASEAN Economic Community for the right insights
The AEC was created in 2015, and has resulted in a massive US$2.6 trillion market with 622 million people. The free movement of goods, services, skilled labour, capital and investment is expected to trigger massive growth, more than 5.3 percent above baseline growth within five years, according to Deloitte.
For SMEs in Malaysia this provides a much larger market to expand into and increased government support. For example, intra-regional tariffs across most ASEAN states have been virtually eliminated, thanks to the ASEAN Trade in Goods Agreement (ATIGA).
To maximise chances of success in overseas expansion, SMEs should consider aligning expansion plans with the ASEAN Strategic Action Plan for SME Development (SAPSMED) 2016-2025, developed by the ASEAN SME Working Group. Through the SAPSMED, your business can leverage opportunities such as support schemes for market access and entrepreneurial education. For example, by 2018, Malaysia and Laos are expected to update the ASEAN SME Service Centre by creating an interactive online platform to minimize the information gap on the types of traditional and alternative funding available to SMEs to support their overseas ventures.
The AEC has already had successes. Recently, the Thai Chamber of Commerce led 30 Thai SMEs on a business matching trip to Myanmar to seek out local partners, with most participants finding local partners to distribute their products. The meeting was possible due to the AEC’s efforts in opening the region and there are many more such opportunities available to businesses that wish to take the plunge.
Link up with partners
To adapt your business to local conditions, an essential step to take is exploring partnerships with other small businesses. Local partners are an ideal choice to collaborate with and facilitate growth. In fact, local businesses have been found to perform better when they're allied with other SMEs. One reason for this is perhaps their better understanding of the nuances of their market and expert insights into all areas of the business, from hiring staff, to adhering to local tax laws.
Once you have linked up with local partners, work to understand their customers and requirements and use these insights to adapt your offerings where necessary.
Partnerships are also vital because, despite their proximity, the 10 ASEAN member states are culturally, ethnically and economically diverse. This can make launching a business in a new market feel like starting from scratch. However, with strong partnerships in place and by learning to appreciate market differences, businesses will be much better placed to expand overseas.
Latch on to technology
Taking the time to learn the language and localise your approach will help to demonstrate your commitment to the local landscape and technology can also be a great help in the transition of easing into a new country.
For example, technology can help businesses navigate the vastly different regulatory landscape throughout ASEAN. While leveraging resources such as various chambers of commerce, companies should also leverage technology and business tools to increase productivity in day-to-day operations abroad. Accounting tools and cloud solutions can be programmed to consider regulations in different markets, relieving businesses of some administrative workload, and with the confidence that their customers would pay them their due in line with local laws, allowing them to focus on value-adding tasks.
When expanding overseas, business builders need to multitask to meet the demands of their new venture. Their workload is likely to double, leaving them with little time to steer performance. Choosing a suitable management system is therefore fundamental to helping them focus on what is more essential – strategy. A good enterprise resource planning system will allow business builders to access real-time analytics and reduce information silos, accelerating operations across business functions. The choice of a multi-dimensional, multi-entity business and preferably mobile solution to enable the parent company to monitor their satellite offices overseas will strengthen the management and control of the various offices through providing an overall view of current cashflow and expenses.
As a business grows, the complexity and number of systems in place as well as the sheer amount of data involved also increase. Investing in the right system early on means that SMEs will have their own ‘backbone’, optimising processes and ensuring agility as the business grows, both at home and abroad.
By Robin Chao, Vice President of Sage Software Asia. He is passionate about helping businesses succeed by providing them with the information, insight and tools they need. At Sage, he works hard to drive the Digital Transformation across Asia, focusing on helping customers resolve their challenges and delivering value through innovative solutions.
This article first appeared on Nov issue, Malaysia SME Magazine (Print). For more information about the publication, click here.