Hong Kong Manufacturing SMEs: Preparing for the Future

114• Who will manage the firm into the future?• When might it be necessary or beneficial to engagein collective action with respect to supplychain development, relocation, or other issues?It will be very difficult for Hong Kong’s manufacturingSMEs to survive and thrive if they do not have goodanswers to these questions. On the other hand,developing good answers to these questions is thefirst step in facing and meeting the challenges thatconfront Hong Kong’s manufacturing SMEs.Potential for Collective ActionThe strategic options listed above focus for the mostpart on what the individual firm could or shoulddo. However, there are some responses to strategicchallenges that may be appropriate for collectiveaction. While SMEs often find ways of collaboratingin terms of lobbying efforts and the general provisionof information and management training, it is far lesscommon to find SMEs collaborating on operationalbusiness matters. The list below is a partial list of thesorts of collective action that SMEs may engage into overcome the disadvantages of small scale. Someof the items focus on dealing with external issues,others focus on trying to obtain the benefits of scalethrough collective action. They include:• Investments in effluent control that areeffective only in large scale. Some industries,like electroplating, semiconductor production,leather tanning, fabric dyeing, and others areby their nature polluting. In some cases, thereare means of handling the effluent that are onlytechnologically effective or cost-effective if theyoperate at relatively large scale. By definition,such investments or scale will be beyond themeans of individual SMEs. However, SMEsbanding together to either invest in appropriatetechnologies, or relocating to the same place tothe investment can be made, may bring thesetechnologies into play. In Spain, for example, agroup of leather producer SMEs cooperated toset up a third party firm to handle the effluentfrom the tanning process for all of them. A groupof Hong Kong electroplating companies havebeen negotiating to relocate to a single industrialpark in Guangdong.• Relocation of production chains. Relocation dueto high costs can be difficult for individual SMEsbecause if they move on their own they mayseparate themselves from their supply chain. Onthe other hand, if a sufficient number of firmsrelocate to the same location, they may provideenough of a critical mass to pull the supply chainwith them. In Northern Italy, a group of footwearmanufacturers decided to all set up production inthe same town in Romania. This induced enoughof the supply chain to follow to make the moveviable. A few years ago, 11 Chinese mobilephone manufacturers all moved in concert toHuizhou. They were able to negotiate with themunicipal government for facilities and eventhe establishment of a mobile communicationsresearch centre to support their activities.• Bulk purchasing. SMEs often cannot purchaseinputs and materials at the same prices of largerfirms with higher volumes. This disadvantage canpotentially be overcome through coordinatedbulk purchasing. There are many examples ofthis worldwide with groups of firms coordinatingto purchase, raw materials, components,warehouse space, transportation services, marketintelligence, consulting services, accounting andpayroll services, and other business requirements.• Full line provision. Some customers, particularlylarge retailers or OEM customers, may desire topurchase a full line of products from a singlesource. Normally SMEs cannot hope to supplysuch customers. However, in some cases it maybe possible for SMEs to join forces to supply thefull line that the customer desires. This requiresa unified approach and clear division of labouramong the SMEs.