Hong Kong Manufacturing SMEs: Preparing for the Future

101manufacturing jobs, which is still not the case inlarge portions of China’s interior.• Develop managerial talent from the ChineseMainlandMany Hong Kong manufacturing SMEs preferto hire managers from Hong Kong. However,the supply of trained Hong Kong managerswith manufacturing experience is declining. Oneobvious potential source of managers is theChinese Mainland. Here the best approach maybe bringing in relatively young managers anddeveloping them within the organisation. Thechallenge is that it may be difficult to retain suchpeople, who may leave to work for competitorsor set up competing companies of their own.This may be unavoidable. The key is likely to behow the company tries to instil loyalty and asense of belonging within the firm.• Bring in managerial talent from elsewhereIn addition to Hong Kong and the ChineseMainland, Hong Kong SMEs should considermanagers from other locations, such as Taiwan,Korea, Singapore, Malaysia, and other places inSoutheast Asia. Several of these economies havemore of an ongoing manufacturing tradition thanHong Kong and managers from these locationsmay be less likely to start up competing firms oftheir own in China. This may require SME ownersand managers to travel more and look beyondtheir traditional sources of managerial talent.• Share wealth with management talentProviding senior managers with some stake inthe business, such as rewards linked to companyperformance or even an ownership share, canprovide motivation and may make it easier toretain key personnel. This may be difficult in SMEcorporate cultures where often only a singleindividual has a real stake in the success of thefirm. The trouble is that in such structures anyonewith sufficient talent will soon go elsewhere orstart up on their own.Business Model StrategiesChanges in business models involve changingthe activity mix of the company in order to focuson the activities in which the company can buildcompetitive advantages and leave other activitiesbehind. Examples of such strategies include:• Shift from manufacturing to outsourcingproductionIf the Hong Kong manufacturing SMEs believethat others, such as firms from the ChineseMainland, will have an unassailable costadvantage, or that they will not be able to obtainsuitable margins through manufacturing, theymay shift from manufacturing to outsourcingproduction to others. In such cases, the HongKong SME would use its knowledge of marketsand contacts with customers to sell its outsourcedproduction.• Become a trader or agent for othercompaniesThe extreme case of outsourcing would bemanufacturing SMEs transforming themselvesinto traders or agents for other companies.Again, they would use their market knowledgeand customer relations to sell the traded goods.Presumably they would be sourcing from otherHong Kong firms or firms from the ChineseMainland in most cases, though in some sectors,finding sources in South Asia or Southeast Asiawould also be desirable.• Become a subcontractorThe opposite approach would be to becomea subcontractor for a larger company, lettingthe larger company deal with powerfulbuyers, export-related regulations, and otheradministrative matters. This approach has beenused by a number of companies that no longercan or wish to deal with the administrativeburden of being an exporter themselves soinstead supply other companies that have theadministrative capacity, financial strength, andaccess to customers to continue to export.