Hong Kong Manufacturing SMEs: Preparing for the Future

104• Strategies for relationship managementMany owners and managers of Hong Kongmanufacturing SMEs operating in the PRD donot spend sufficient time in the PRD to get toknow local officials as well as their Mainlandcompetitors. An active strategy of governmentrelations will help Hong Kong SMEs betterunderstand rules and regulations and howthey are likely to be enforced. A number ofinterviewees commented that too many HongKong entrepreneurs expect to be able to dobusiness in the Chinese Mainland, produce inthe Mainland, sell in the Mainland, and in otherways leverage the Mainland without spendingmuch time in the Mainland themselves. Suchan approach will always leave Hong Kongentrepreneurs a step behind their Mainlandcounterparts when it comes to anticipating andunderstanding the nature of changing rules andregulations and precisely how they are going tobe administered.Exit or Consolidation StrategiesGiven the severity of the forces influencing HongKong manufacturing SMEs, we expect that therewill be significant consolidation and / or exit in somesectors. Approaches include:• Sell out or shut downHong Kong SMEs that find their positionuntenable and prospects bleak may choose toexit by selling out (if a buyer can be found) orsimply shutting down. While a last resort, suchoptions must be assessed from time to time. Thekey here would be working with new owners orlocal governments to ensure an orderly transferor closure and minimising the losses incurredduring the exit process.• Change lines of business completelyFor some firms, exit in one sector may be thefirst step to developing new businesses in othersectors. The key here is to ensure that thereis a market for the new product or service,that the company can develop some distinctcompetitive advantages, and that it has or canobtain the resources to make the entry work.In other words, any SME considering changinglines of business should go through all the stepsindicated for selecting businesses to be in andfor developing strategies for the new businessesdescribed below.• Consolidate the sector by acquiring otherfirms or investing to beat them in themarket place and grow organicallyThere is likely to be significant consolidation inindustries currently populated by Hong Kongmanufacturing SMEs. Some companies maychoose to take the initiative to consolidate theirsector, at least in part, by acquiring competitorsor by investing to grow by beating them in themarketplace. This approach would require theresources to make the acquisitions or investmentsnecessary. Sectors that are in a state of flux maybe ripe for such moves for the right company.We should remember that Hong Kong’s largecompanies started as small companies andgrew by recognising and acting on businessopportunities. In difficult times, strong firms maybe able to gain competitive positions that they willretain when times get better.