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ma r k E t in t E l l i gE n c E
The SenTimenTS from
The Ground
A snapshot of some of the business issues faced by local enterprises in
these trying times.
Rising costs, shortage of labour,
insufficient cashflow are some of
the recurrent and typical challenges
that small and medium enterprises (SMEs)
face in today’s capricious business
environment. Faced with a shrinking
and ageing population, the government
has been advocating businesses to
improve productivity. However, SMEs
are finding it increasingly challenging and
difficult to maintain the competitiveness
and productivity of their businesses.
The Association of Small and Medium
Enterprises (ASME) recently commissioned
a survey to establish the challenges faced
by local SMEs in Singapore amidst the
current business climate and prevailing
government policies, as well as gather their
feedback and business sentiments.
Costs and Turnover
Many SMEs have been facing and raising
concerns as they see steady increases in
labour, rental and operational costs. 79.6
per cent of the SME respondents surveyed
demonstrated that their current cost of
operations have increased, with a majority
of 40.1 per cent revealing that their current
cost of operations have increased by over
10 per cent, followed by the second highest
poll of 28.2 per cent of them revealing
that their current cost of operations have
increased by over 20 per cent.
has your current cost of operations:
Decreased 6%
Remained the same 14%
Increased 80%
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En t r E p r E n E u r s’ Di g E s t
80%
70%
60%
50%
40%
30%
20%
10%
0%
28.20%
40.10%
By less than 10%
By more than 10%
By over 20%
11.30% 14.10% 3.50%
2.80%
Increase Remain the same Decrease
75.6 per cent of the respondents are of
the view that in the next three months
ahead, they are estimating that their cost
of operations will increase, and 76 per cent
of SMEs whose current cost of operations
have increased are still expecting their cost
of operations to increase within the next
three months. Only a mere 6.6 per cent
of the respondents indicated that they
are expecting their cost of operations to
decrease.
In the 3 months ahead do you see your cost of
operations:
80%
70%
60%
50%
40%
30%
20%
10%
0%
20.70%
31.90%
23.00%
17.80%
Decreasing 7%
Remained the
same 18%
Increasing 75%
By less than 10%
By more than 10%
By over 20%
0.70%
Increase Remain the same
4.40%
Decrease
1.50%
39.3 per cent of the SMEs’ current turnover
had increased whilst an almost equivalent
35.3 per cent of them revealed that their
current turnover had decreased.
has your current turnover:
Increased 80%
40%
35%
30%
25%
20%
15%
10%
5%
0%
11.30%
14.00%
By less than 10%
By more than 10%
By over 20%
16.20%
9.90%
14.00% 25.40% 9.20%
Increase Remain the same Decrease
Decreased 6%
Remained the same 14%
Amongst all the respondents, the most
number of SMEs indicated that their
turnover remained the same, while 16.2 per
cent of them, and also the second highest
registered a decrease by over 20 per cent
of its current turnover.
When asked about SMEs’ short term view
on their turnover, the majority of SMEs
indicated that they are expecting to see an
increase in their turnover in the three months
ahead. However, a higher percentage of
them expect turnover to remain the same
as their current figures.
Employment Plans
Despite the uncertain economic outlook
amidst the Eurozone Crisis, US’ and
China’s economic slowdown, as well as
a weakening job market, SMEs are still
looking into hiring and increasing their staff
strength. Interestingly, 48.1 per cent have
revealed that they will be increasing their
staff strength for the next six months, while
40.7 per cent of them demonstrated no
change to their staff strength within the next
six months.
SMEs' employment plans for the next 6 months:
However, this trend also highlights the
manpower shortage issues that SMEs
are facing, which explains the reason
why SMEs are looking into hiring. Given
the fact that most SMEs are looking at
increasing staff strength, and only 11.1
per cent of them indicated that they have
intentions to decrease staff strength, the
paradox of having difficulty hiring locals
becomes a pertinent issue.
overseas Expansion and Relocation
Plans
62 per cent of the SME respondents
indicated their intention to expand/relocate
overseas. Of the SMEs intending to expand
their businesses overseas, a majority of
them are looking to expand to neighbouring
countries in the Southeast Asian region.
The top three countries within the region
are Indonesia, Malaysia and Vietnam. This
is perhaps due to the proximity and good
network and connections in relation to
these selected southeast Asian countries.
Within Asia, China remains the popular
choice for expansion, followed by India.
Rising costs has inevitably drove SMEs
to relocate to other regions where
labour, land and raw materials are
cheaper. Considering how Singapore’s
neighbouring countries are actively
opening up and developing, it is no
surprise that SMEs will search for other
cheaper alternatives to re-shift their
business operations.
It is also worthy to note that with the slew
of new policies imposed, many SMEs
are concerned how these regulations will
negatively affect their industries. There
Decrease staff strength 11%
Increase staff strength 48%
No change to staff strength 41%
are still many jobs available out there for
locals but many SMEs still have difficulty
recruiting local manpower in the market
and hence find it difficult to meet the
foreign labour quota. With whatever little
manpower that is left and are available
to SMEs, many locals are not committed
and are unwilling to work especially in
the lower tiered jobs, such as drivers,
waitresses, etc.
Despite Singapore’s push to improve
productivity, SMEs face the challenge of
locals reluctant to increase productivity
or are unwilling to work overtime even
though their salary has been increased.
Key Strategies
Going forward, SMEs are looking towards
expanding their existing range of products
and services, and enhancing their branding
and marketing presences. This includes
offering new products and services or
extending their existing products and
service lines.
Other than the aforementioned plans to
expand/relocate to the overseas market, a
majority of them are also looking to increase
productivity through training as well as
enhancing their existing capabilities in terms
of innovation, R&D, technology, etc., which
ma r k E t in t E l l i gE n c E
are in line with Singapore’s recent policies
to improve productivity.
Taking a closer examination on SMEs
whose cost has increased and what their
key strategies are for the next six months,
the survey results found that out of the 79.6
per cent whose current cost of operations
had increased, more than half of them
indicated that one of their key strategies is
to expand their existing range of products
and services, while 48 per cent indicated
that they will enhance their branding and
market presences.
It is also noteworthy that many whose cost
operations has increased are looking into
taking steps to contain their costs such as
relocating, expanding overseas as well as
streamlining their operations.
In Conclusion
Looking ahead, SMEs are generally
optimistic in terms of their turnover, with
a slightly higher percentage of them
expecting their turnover to increase in the
short term. However, there are still SMEs
who are tightening their business outlook
with a higher percentage of them revealing
that they expect their turnover for the next
three months ahead to remain the same.
The two most pertinent issues are rising
costs and manpower shortages. Amidst
these challenges faced, SMEs are taking
strategic steps to differentiate themselves
from their industry peers, as well as taking
steps which will improve their productivity.
SMEs are also looking at other alternatives
to ensure the competitiveness, sustainability
and profitability of their business, for e.g.
relocating and expanding overseas.
Many SME owners have raised their
concerns over the recent policies
aforementioned. With the government
taking more initiative to gather feedback
and ground sentiments to better implement
multi-pronged policies, this survey will also
serve as a platform to consolidate and
highlight the challenges, feedback and
solutions that SMEs have raised, to higher
authority.
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